Reaching out

No money, no development. This is what 42-year-old Teng Jianping, a farmer in Dainan county, Jiangsu province, said most in this interview.

Teng signed a contract with the village to manage a 10 hectare vineyard last year. But with few funds on hand, he was soon caught in a cash flow squeeze. He contacted several banking branches for a small loan but all failed.

"Applying for loans from banks is very complicated and usually takes a long time," says Teng.

His business was finally saved by Yongtaicheng Rural Micro-credit Company, one of the first micro-credit companies in Jiangsu province.

Thanks to the government's push to boost rural financing to fuel rural development, more farmers such as Teng now see renewed hope to start new businesses.

In the third Plenary Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC) in October, the government outlined the financing regime in the rural areas - a multilevel financing system with "adequate capital, sound function and safe operation".

He Wenguang, a financial professor with China Agriculture University, says the financing demands in rural areas covers a wide range, including loans, insurance, guarantees and consulting, but with separate and small-scale features.

The current financing situation in the country's rural areas, however, is not satisfactory, particularly in vast, underdeveloped regions.

A recent report by the country's central bank showed that at the end of 2007, more than 2,800 townships or counties in China, or 7 percent of the total, had no access to credit.

"Agricultural Bank of China, Agricultural Development Bank of China and rural cooperatives used to be the three major pillars for rural financing in 1990s, but now more innovative rural financing institutions are springing up, and the government also strengthens their support in this regard," says Du Xiaoshan, head of the rural development and research department of China Academy of Social Sciences.

In early October, China Banking Regulatory Commission (CBRC) said it was coordinating with other government agencies and local governments to improve related policies and roll out detailed plans for expanding a pilot program that supports new types of rural financial institutions next year, to boost funding for farmers and small rural companies.

The banking regulator launched the trial project in late 2006 to help financial institutions reach credit-strapped people and firms in rural places. The project, which allows foreign and domestic banking capital to invest in, or to purchase or establish banking institutions in rural areas has so far been extended from the originally planned six provinces to all of the country's regions.

According to the banking regulator, 61 new institutions, including village banks, loan companies and rural cooperative fund associations, opened for business at the end of August, taking in a combined deposit of 2.83 billion yuan while extending 1.92 billion yuan in loans.

About 47 percent of the loans, or 895 million yuan, went to rural households and around 22,800 rural families have reportedly benefited from the new institutions. And the banking regulator estimated that more than 100 such institutions will be serving the rural markets by the end of 2008.

Meanwhile, foreign financial institutions also have a growing interest in tapping China's rural areas.

Citibank China, one of the largest foreign banking players in the country, obtained regulatory approval in October to establish two lending companies in Hubei province, making it the first foreign lender to start such business domestically. Its major rivals including HSBC and Standard Chartered Bank have already rolled out rural outlets and are preparing for further expansion in the nation's underdeveloped regions.

On August 26, American International Group Inc announced it has acquired 18 percent of MicroCred Nanchong (MCN) and the exclusive right to sell micro insurance to MCN clients for two years.

MCN is the first wholly foreign-owned micro-credit company in China. In addition to AIG, MCN is jointly owned by the International Finance Corporation, KfW Bankengruppe, and MicroCred S.A.

"Some small enterprises or self-employed workers in rural areas have a lucrative business, and banks could make a good profit from rural businesses if they manage it properly," says He Wenguang.

(China Daily 11/24/2008 page3)