Agricultural Bank of China Allocates 380 Billion Yuan to the Agriculture, Rural Areas and Farmers Sector

Agricultural Bank of China recently released its 2015 interim report. The report shows that in the first half of this year, the bank made serving “agriculture, rural areas and farmers” its strategic priority, focusing on financial services in key areas such as new types of agricultural business entities, water conservancy and urbanisation, with county-level loans increasing by 161.8 billion yuan.

Zhao Zhongshi, business director for “agriculture, rural areas and farmers” at ABC, introduced that this year, with the bank's overall credit scale remaining flat compared with the previous year, ABC allocated as much as 380 billion yuan in credit for “agriculture, rural areas and farmers”, an increase of 21% over the previous year.

It is understood that since 2008, ABC has separately allocated credit for “agriculture, rural areas and farmers” according to the standard that the growth rate of “agriculture, rural areas and farmers” loans should exceed the bank's overall average by 2—3 percentage points, effectively safeguarding the development needs of its “agriculture, rural areas and farmers” business.

Pursuing innovation, keeping a close eye on key areas and weak links in “agriculture, rural areas and farmers”

At present, China is in a critical period of transition from traditional agriculture to modern agriculture. The transfer of rural land management rights has clearly accelerated, and new types of agricultural business entities such as family farms are increasing rapidly. As of the end of November 2014, there were 877,000 family farms with an average planting scale of 200 mu nationwide, 3.17 million large farming households with an average planting scale of 50 mu, and 1.267 million farmers' cooperatives. How to meet the new demand of new types of agricultural business entities for credit funds urgently requires innovation in rural financial products and service methods.

Zhao Zhongshi said, “Facing new demands directly, ABC has concentrated on solving three problems in recent years. First, the issue of loan access. New types of agricultural business entities have emerged in recent years with the development of scale operations. To serve this new group of loan recipients, we must first make them eligible for access through loan channels. Second, the issue of guarantees. New types of agricultural business entities operate on a large scale and have large capital needs, making the problem of difficult guarantees fairly prominent. Following the policy guidance of the People's Bank of China and the China Banking Regulatory Commission, ABC has made some innovations, such as mortgages on land management rights, and exploring the use of attachments on land operated by large specialised households, such as greenhouses and facilities, as well as large agricultural machinery and tools as collateral. In the future, further exploration will be made of methods such as mortgages on farmers' housing property rights. Third, the issue of loan amounts. In the past, for loans to farmers, the single-household amount was generally controlled at 50,000 or 100,000 yuan, with a ceiling of no more than 300,000 yuan. But now some scale operators have contracted as much as 10,000 mu, 20,000 mu or 30,000 mu of land, and the previous loan ceilings cannot meet demand. ABC now explicitly stipulates that the maximum loan amount for family farms can reach 10 million yuan.”

Facing the constant emergence of new entities and new demands in “agriculture, rural areas and farmers”, ABC has also developed a series of products including loans for large specialised households (family farms), loans for farmers' professional cooperatives, camellia oil loans, agricultural machinery purchase loans, water conservancy construction loans and rural land improvement loans. At present, under ABC's “Jinyinong” brand, there are already 138 distinctive “agriculture, rural areas and farmers” products, basically able to meet the financial needs of “agriculture, rural areas and farmers” customers.

Starting from July last year, ABC was the first among financial peers nationwide to issue nationwide measures for the management of mortgage loans on rural land management rights. Data show that as of the end of June this year, ABC supported 163,000 large specialised households and family farms, with a loan balance of 31.7 billion yuan.

Building mechanisms: the pilot for the agriculture, rural areas and farmers business division will cover all county-level branches

Regarding how large commercial banks can well serve “agriculture, rural areas and farmers”, a worldwide challenge, Feng Yancheng, general manager of ABC's Department of Agriculture, Rural Areas and Farmers Policy and Business Innovation, believes that “ABC straddles both urban and rural markets, with half of its institutions in cities and half in rural areas, and the same for its employees, so doing a good job in the ‘agriculture, rural areas and farmers’ business requires a strong institutional arrangement.”

ABC launched the pilot reform of the agriculture, rural areas and farmers financial business division in 2008. It has now expanded to all county-level branches under 20 tier-one branches in 19 provinces nationwide. As of the end of March this year, the county-level loan balance of the 20 branches in the pilot agriculture, rural areas and farmers business division was 2.35 trillion yuan, an increase of 124% compared with before the pilot reform in 2008, 27.4 percentage points higher than the bank's overall loan growth over the same period. At the same time, the county-level loan-to-deposit ratio rose from 34.7% to 49.6%. Feng Yancheng said, “For these 20 pilot branches, the income-to-cost ratio fell by 10%, the non-performing loan ratio declined continuously, and the return on assets was 1.2%, basically achieving an organic combination of social responsibility and commercial operation, as well as the sustainable development of the ‘agriculture, rural areas and farmers’ business.”

It is understood that ABC's agriculture, rural areas and farmers financial business division implements separate management in six aspects: capital management, credit management, accounting, risk provisioning and write-offs, fund balance and operations, and assessment, incentives and constraints. The state also implements three support policies for the pilot reform of ABC's agriculture, rural areas and farmers financial business division: reduction or exemption of regulatory fees, preferential business tax on agriculture-related loans, and a differentiated deposit reserve ratio.

In April this year, the State Council officially approved ABC's expansion of the pilot reform of the agriculture, rural areas and farmers financial business division to all county-level branches. Feng Yancheng said, “Next, in accordance with the head office's requirements, all 2,089 county-level branches will be included in business division management.”

Expanding channels: traditional finance catches the express train of the internet

⟦NL> “Relying on the internet, mobile communications and big data technology, internet finance can better solve service difficulties such as rural customers being widely distributed, with many transactions, small amounts and frequent use. In terms of cost control, risk identification and resource allocation efficiency, it has unique advantages for overcoming ‘agriculture, rural areas and farmers’ financial service problems.” Chang Yafeng, general manager of ABC's Rural Household Finance Department, said that ABC is also integrating “internet+” into “agriculture, rural areas and farmers” financial services.

But Chang Yafeng also believes that, at present, it is relatively difficult to solve all problems in rural areas simply with the internet model, and a combination of multiple forms is still needed. At present, in rural areas, ABC is working to build a “four-in-one” service channel system of staffed outlets, self-service banks, “Jinsui Huinongtong” project equipment and internet financial service platforms. “ABC provides services through the extension of the ‘Huinongtong’ project, using the ‘card + platform + agency services’ model, including financial services for production and daily life, while also solving payment issues.”

⟦NL> According to the introduction, ABC has also developed and launched “E-Nong Guanjia”, “Yinxuntong” and the “Sirong Platform”, and has cooperated with enterprises such as JD.com and Alibaba. Among them, “E-Nong Guanjia” provides e-commerce, convenient payment and other services for county-level production and circulation, connecting producers, wholesalers, rural shops and farmers, and realising two-way circulation of goods between rural and urban areas.