How to Design a Sound Institutional Framework for Mortgage of Land Management Rights

Developing modern agriculture requires sufficient capital as a prerequisite. Only by turning the large amount of idle assets held by farmers into capital that can "generate money" can farmers' wallets fill up faster. At present, public attention is focused on the mortgage of rural land management rights. To make land mortgage succeed, it is necessary to stabilize land income rights, transfer land management rights, and resolve problems in four areas.

First, the link of confirming and issuing certificates. Most farmers are unwilling to pledge their contracted management rights certificates to banks, so the government can issue management rights certificates separately, specifically for mortgage purposes; Shandong Zaozhuang has already practiced this. To address risks such as failure to pay transfer fees on time in the event of loan default and land being left abandoned, mortgaged land must obtain the consent of farming households and the collective.

Second, the link of value assessment. Farmers' own contracted land can be mortgaged, and the mortgage amount should mainly be based on the transfer fee; to ensure that farmers have a source of livelihood, the mortgage ratio or term should be limited. If the transfer fee has already been paid for mortgaged rented land, once the bank disposes of the land management rights, the successor only needs to repay the loan. Because the mortgage rate is relatively low, the repayment amount may be lower than the cost of directly renting land, and the management rights can be transferred smoothly. If the transfer fee has not been paid, the successor must pay both the transfer fee and repay the loan, which is more expensive than directly renting land, and the management rights will not be transferable. Moreover, the borrower can obtain a loan while paying almost no cost, making loan fraud likely, and in this case land mortgage is not feasible. However, if the lender has significantly raised the land output level through infrastructure construction, or the contract price for land transfer is far lower than the current market price and the land appreciation exceeds the bank loan, then even if the transfer fee has not been paid, obtaining the land management rights is still cheaper than directly renting land, and land mortgage is also feasible.

Third, the link of registration and transfer. Relying on grassroots agricultural economic stations, a physical rural land transfer market can be built, service functions can be expanded and strengthened, and work such as confirming value, registering mortgages, and auctioning and transferring management rights can be carried out. To prevent duplicate mortgages and unauthorized disposal of mortgaged land, it should be stipulated that land mortgage must be registered with the agricultural department. The mortgage registration information system should achieve regional networking and information disclosure, so that both banks and land renters can check mortgage details.

Fourth, the link of risk disposal. The government should establish a corresponding institution to manage mortgaged land on behalf of banks and to purchase land management rights from banks when the land cannot be transferred. This institution should operate according to market mechanisms and achieve self-financing. At the same time, a risk-sharing and benefit compensation mechanism should be established to incentivize banks to do a good job in land mortgage business.