Where does the difficulty for farmers in getting loans lie, and how can it be solved?
Since April last year, the central bank has repeatedly cut reserve requirements in a targeted way for the agriculture, rural areas and farmers sector, releasing liquidity that has reached a scale of one trillion yuan, which will play an important role in promoting the sustainable development of our country's agriculture, rural areas and farmers. However, although farmers' demand for loans is very strong, the normal credit approval rate for rural households is only 27.6%, far below the national average of 40.5%. The harsh reality of farmers“difficulty in getting loans” has always plagued the current economic and social development of rural areas. So, where exactly does the difficulty for farmers in “getting loans” lie? How do banks view it? How can it be solved? Regarding this, our newspaper's reporter conducted in-depth interviews.
Where does the “difficulty in getting loans” lie?
——High loan thresholds, cumbersome procedures, insufficient collateral value, small loan amounts, short repayment cycles
Sun Village in Wandi Town, Daming County, Handan City, Hebei Province is a typical small village in southern Hebei. The village has more than 80 households and 400 people, and the whole village is basically mainly engaged in growing grain. Village Party secretary Sun Zhenshan is 58 years old this year, but he is full of energy and has a loud voice. When talking about farmers' loans, he said: “It is too difficult for farmers to get loans now. Not to mention not being able to get a loan, just running the procedures can make a person dizzy.” Sun Zhenshan said that if there really is some urgent matter, villagers would borrow some money from relatives and friends rather than seek a bank loan.
Wang Hongliang is 40 years old this year and is from Yangqiao Town, Daming County. He used to be engaged in wholesale and sales of vegetables. The year before last, he used more than ten years of savings to transfer more than 300 mu of land south of Dianbei Village, Wangcun Township, in that county, and established a family farm. When talking about his thoughts for the future, he said with a worried look: “I originally wanted to use a loan to turn the rest of the contracted land into greenhouses, but the bank just would not lend, saying my collateral was no good. Does not the state say that land contracting contracts can be used as collateral? Why does it not work once it reaches the county level? Because of the lack of funds, I now not only cannot expand the scale, but I do not even dare to have the idea of rebuilding standard greenhouses.” Wang Hongliang said.
“The threshold for farmers' loans is too high, and there are too many procedures, which simply cannot effectively drive farmers to start businesses.” said Liu Jun, deputy secretary of the Party branch of Xiadianzi Village, Guangdaojiang Town, Hunjiang District, Baishan City, Jilin Province. When the reporter interviewed Cheng Lifeng, a villager from Jian'an Village, Jian'an Township, Wutai County, Xinzhou City, Shanxi Province, he said: “Now to build a greenhouse in rural areas, the cost is 30,000. Sometimes the bank gives microcredit, which is only 30,000-50,000, and repayment has to start after three months, so loans cannot solve much of a problem, let alone when the loan threshold is so high and the procedures are so complicated.”
“Now our city has special agriculture-related loans, 50,000 yuan interest-free, with repayment starting after six months, but agricultural projects often require large investment, bring slow returns and carry high risks, so 50,000 yuan is still on the low side. A while ago I planned to invest in facility agriculture, but in the end, because I could not get a loan and could not make the capital investment, I finally gave up.” a farmer from Dagushan Town, Anshan City, Liaoning Province, told the reporter.
Why is it so difficult to get agriculture-related loans? Not long ago, Wang Dongjing, vice president of the Party School of the Central Committee of the Communist Party of China, wrote in an article: “The fundamental reason farmers have difficulty getting loans is still that there is too little collateral and insufficient collateral value.” Zhang Jiaping, postdoctoral researcher at China Dalian Advanced Institute of Managers and doctor of economics, said: “The difficulty farmers have in getting loans lies in excessively high risks, not only from natural risks in the agricultural production stage, but also from market risks in agricultural services, agricultural product processing and circulation. These uncertain factors are risks that both farmers and financial institutions find hard to control. In addition, the lack of disposable collateral and guarantee products for farmers is another obstacle affecting their ability to obtain agriculture, rural areas and farmers credit lines.”
Banks have ample funds, so why does “reluctance to lend” occur?——Mainly to prevent the emergence of non-performing loans
“In light of our country's financial policy, after the central bank cut reserve requirements and interest rates, funds are now ample, and the state has policies for agriculture-related loans. But our main clients are leading enterprises in agricultural industrialization. After all, large enterprises have better credit and generally do not produce non-performing loans.” a credit manager from the Xinjiekou Sub-branch of the Beijing Branch of the Industrial and Commercial Bank of China told the reporter.
The reporter then visited some city commercial banks in Beijing, such as Bank of Beijing, Bank of Jiangsu, Baoshang Bank and Bank of Jinzhou. The replies received were similar to those from ICBC. “For us, risk prevention and control must be given priority to prevent excessively high non-performing loans, and rural areas are not our main business either,” a senior executive of Bank of Jiangsu told the reporter. Similar to city commercial banks, foreign banks' businesses are relatively distant from agriculture, rural areas and farmers, and the scale of their agriculture-related business is not very large, so there are not many agriculture-related loans either. The reporter confirmed this at Bank of East Asia.
Through the reporter's investigation, the financial institutions currently relatively active in the agriculture, rural areas and farmers sector are rural credit cooperatives, rural postal savings banks, rural commercial banks and rural cooperative banks. For this reason, the reporter interviewed Cui Weiwei, director of the business department of the Postal Savings Bank branch in Luanping County, Chengde City, Hebei Province. He said: “In the first half of 2015, we issued a total of 303 loans, amounting to 52.884 million yuan, a net increase of 5.926 million yuan. Among them, 206 microcredit loans were issued, totaling 26.97 million yuan. Compared with the past, the loan amount has increased somewhat.”
According to the above, Luanping County in Chengde has been actively lending and no so-called “reluctance to lend” has appeared, so what is the situation in other areas? In response, the reporter once again visited an industry insider in Daming County familiar with the banking situation and made a detailed inquiry. He said: “Banks are not short of money now, and those above have continuously issued targets and tasks to grant loans. But once loans are issued, the risk of farmers defaulting is high, and many people simply stop repaying. Even if land is used as collateral, it is difficult to collect, thus forming bad debts and dead accounts. In order to prevent non-performing loans, some procedures need to be relatively complicated.”
So what exactly is the current risk of non-performing loans in the banking industry? Song Xianping, risk director of Agricultural Bank of China, said at a results briefing: “Judging from economic operating conditions, the growth of commercial banks' non-performing loans has entered the second half. Due to lagging factors, overall non-performing loans are expected to peak in the first half of next year.”
How to solve the “difficulty in getting loans”
——Increase lending entities, simplify loan procedures, build a collateral guarantee system
“An important reason for farmers‘difficulty in getting loans’ is that there are too few financial entities providing agriculture-related loans. When banks are in a seller's market, they will not have the initiative to lend. However, this is related to the stage of development of our country's financial industry.” Dr. Xu Hongwei of the Institute of Economic and Social Development at Dongbei University of Finance and Economics told the reporter.
Not long ago, at the Lujiazui Financial Forum in Shanghai, Zhou Mubing, vice chairman of the China Banking Regulatory Commission, said: Continue to vigorously develop inclusive finance, increase support for the agriculture, rural areas and farmers sector, promote the normalisation of the establishment of private banks and village and township banks, support and encourage private capital to invest in small and medium-sized rural financial institutions, and continuously improve a multi-level, broadly covered and differentiated financial institution system. Fan Yifei, deputy governor of the People's Bank of China, also said: Continuously increase the construction of financial infrastructure, which is of extremely important significance for expanding the coverage of financial services and strengthening financial support for agriculture, rural areas and farmers and underdeveloped areas.
“The monetary authorities should not only consider the potential control effect of the formulation and implementation of credit policy on the default risk of agriculture, rural areas and farmers loans, but also more actively promote the construction of a collateral guarantee system in vast rural areas.” Dr. Zhang Jiaping said that solving the “difficulty in getting loans” cannot be considered only from the bank side. All localities should implement different agriculture-related loan policies according to different circumstances and increase the value of agriculture-related loan collateral.
At the practical operational level, the difficulty in getting loans is not without solutions. Hou Yali, Party secretary of Yidaohe Village, Mofang Township, Dai County, Xinzhou City, Shanxi Province, suggested: “College student village officials are an important subject in current rural areas. Could we try using the village officials' fiscal wages as a guarantee for small and medium-sized loans?” Wang Jiangfeng, Party secretary of Chuankou Village, Huayuantun Township, Datong City, suggested: “Simplify procedures, actively offer credit authorization, create credit villages, and increase the scale of loans.”