How to Solve the Difficulty of Rural Loans? Innovation in Collateral Methods Brings New Ideas
Jianyang, located in the western Sichuan Basin, has long been known as the “Majestic Prefecture of the Land of Abundance” and is one of Sichuan's main production areas for grain and oil, meat, and fruit. Its mutton soup is famous nationwide, and the well-known Haidilao hot pot also originated here.
To implement the spirit of the Third Plenary Session of the 18th Central Committee and the 2014 No. 1 Central Document, and to accelerate the development of modern agriculture, in early 2014 the Chengdu Branch of the People's Bank of China and the Sichuan Provincial Department of Agriculture, among others, jointly issued the "Work Plan for the Pilot Program of Guaranteed Loans Based on Rural Land Transfer Income in Sichuan Province," and Jianyang became one of 9 pilot counties (cities). A year has passed. How has the pilot work in Jianyang been progressing? A reporter conducted an on-site interview.
Transfer of Land Operation Rights, Scale Operation Creates Economic Benefits
In Lianhua Village, Shibandeng Town, Jianyang City, which had just finished hosting a strawberry-picking festival, the reporter saw fresh strawberries growing again in the fields. “After the next round of strawberries is picked, this field will be prepared for planting vegetables such as tomatoes, eggplants, and peppers.” Chen Huarong, who is in charge of this more than 250 mu of strawberry land, told the reporter, “Concentrated planting of cash crops has produced a scale effect and is much more profitable than when each household used to plant just a few mu.”
Chen Huarong was originally an ordinary farmer. In recent years, as land transfer work has expanded in Sichuan Province, she also took the lead in establishing a farmers' professional cooperative. At present, her cooperative already holds the operation rights to more than 1,000 mu of transferred land. “In the past, my family had only one or two mu of land and could only grow some green vegetables. Later, family members went out to work, so we simply stopped farming.” Villager Liu Shuiqing told the reporter that after the transfer of land operation rights was realized, she rented her family's land to the professional cooperative, and the rent could bring in 650 yuan per mu per year, “which is more than giving it to others to farm.”
Only when land transfer procedures are standardized can farmers feel secure and renters feel at ease. Wu Liankun, deputy director of the Jianyang City Rural Operation Management Bureau, told the reporter that the Rural Operation Management Bureau is responsible for confirming rights for all cultivated land in Jianyang through aerial photography, ground demarcation, and other methods, so that every plot of land has a record in the Agricultural Economic Management Bureau. At present, the city has completed the investigation, baseline survey, and rights confirmation registration for 1.6 million mu of rural contracted land, the field mapping work has been fully completed, and all rights confirmation work will be completed in the first half of this year.
Guaranteed Loans Based on Rural Land Transfer Income Solve the Funding Problems of Agricultural Production
Agricultural development requires large amounts of capital investment for park road maintenance, the purchase of seedlings and feed, and so on. “Shareholders are unable to increase capital investment, private lending costs are high, and there is no effective collateral for borrowing from banks. Funding is a major problem.” Fan Zengshu, general manager of the Jianyang Qianfo Rural Land Professional Cooperative, said frankly. It happened that Jianyang City was carrying out the pilot program of guaranteed loans based on rural land transfer income. After application and a series of screenings, the cooperative successfully became the first loan recipient in all of Ziyang. Chen Huarong was also a beneficiary of a guaranteed loan based on rural land transfer income. Last year, using the land operation rights to more than 250 mu of strawberry land as collateral, she borrowed 1 million yuan from Ziyang Minsheng Village Bank.
Both loans, one to Chen Huarong's professional cooperative and one to the Qianfo Rural Land Professional Cooperative, were guaranteed by Jianyang Xingyue Financing Guarantee Company, and the loan recipients respectively used the operation rights to 256 mu and 964.27 mu of contracted rural land as counter-guarantees. “These two loans were given certain preferential treatment, with a guarantee fee rate of 2.5%.” Yuan Lin, general manager of Jianyang Xingyue Financing Guarantee Company, disclosed to the reporter, “Both sides are now operating quite well, paying interest as usual every month, and repayment at maturity should not be a problem.”
It is understood that a guaranteed loan based on land transfer income refers to a loan in which a farmer or the transferee of rural land contractual operation rights voluntarily submits a loan application, a financing guarantee company provides a guarantee to a financial institution, and the financial institution then issues the loan. The Rural Operation Management Bureau provides proof of agricultural land ownership and proof of mortgage registration for agricultural land contractual operation rights.
Cheng Youcong, deputy director of the Jianyang City Financial Office, told the reporter that at present Jianyang City has successfully issued guaranteed loans based on rural land transfer income totaling 6 million yuan to 4 professional cooperatives. In 2015, guaranteed loans based on rural land transfer income will continue to be promoted throughout Jianyang.
Guaranteeing Is Not Easy, Financial Innovation Needs Further Development
To a certain extent, guaranteed loans based on rural land transfer income have solved the funding difficulties of farmers' operations after rural land transfer. However, in the process of further promotion, there are still some problems that urgently need to be solved.
“At present, this loan model relies on guarantee companies to bear the bottom-line risk, so farmers can smoothly borrow money from banks. But the risk for guarantee companies is actually very high.” Cheng Youcong believes that the counter-guarantee obtained by the guarantee company is the land operation rights of agricultural land. If farmers default, the company repays the money for them and then transfers the land operation rights out, it is very likely to suffer a loss. “If the interests of guarantee companies cannot be protected, promoting the model will be full of difficulties.”
“At the time, we chose to provide the guarantee not only because there was a mortgage on the land operation rights, but also because a value assessment was made of the attachments on the ground.” Yuan Lin said that taking Chen Huarong's strawberry land as an example, the price of the greenhouse facilities on the ground was assessed at that time and was also more than 1 million yuan. If the loan defaulted, the beneficiary from selling these facilities would also be the guarantee company, which is why the guarantee was provided.
“But the rights and interests in the attachments on the ground cannot be guaranteed to belong to the guarantee company either.” Cheng Youcong pointed out that although the contract states that the guarantee company has the right to dispose of the attachments on the ground, if the farmer also has other creditors, the guarantee company's priority right to repayment cannot be guaranteed. “In actual operation, the attachments on the ground, as expected income, can neither achieve mortgage registration, and they also carry disaster risk and market risk. Once the borrower cannot repay the loan in full and on time, the guarantee institution's right to recover will not be guaranteed.”
At present, in order to solve the difficulty of debt repayment and disposal, Jianyang City has established a rural property rights trading platform, but business has not yet been carried out effectively. Cheng Youcong introduced that next Jianyang will study and establish a risk compensation fund for the pilot program of guaranteed loans based on rural land transfer income, and provide compensation according to a certain proportion for risk losses incurred in pilot business, so as to increase the enthusiasm of guarantee companies and other financial institutions to participate.