Hard to get a loan and expensive to borrow? Rural financial self-governance solves the problem

Insufficient supply of basic rural financial services, how to solve the problem of hard and expensive loans

Zhejiang explores "rural financial self-governance"

Loans are more convenient, credit limits have increased, and farming households are more creditworthy

Taotou Village, located on Huaguman Island in Sanmen County, Taizhou City, is surrounded by the sea on three sides. As early winter approaches, the sunshine here is still warm.

Of the more than 450 households in the village, most are engaged in marine aquaculture. Next to the village are the villagers' respective fish ponds, where the water surface glistens in the sunlight, and egrets can be seen skimming past from time to time.

Villager Chen Huafa's fish pond is also here. Old Chen is already 50 years old this year and has contracted a 30-mu fish pond for mixed culture. The pond produces mud crabs and blood clams, as well as small white shrimp and razor clams.

In previous years, Chen Huafa only contracted sixteen or seventeen mu of fish ponds. Seeing that the aquaculture situation has been good in recent years, he expanded the scale this year, and the rent also went up. "The year before last, one mu of pond was still only 2,800 yuan a year, but this year it rose to nearly 5,000 yuan," Old Chen said.

Add in the costs of seedlings, bait, fertilizing the water and so on, and the investment of more than 400,000 yuan left Old Chen at a loss, and also made him borrow money from a bank for the first time in his life.

"Why didn't you take out a loan before?" "At that time, I thought the procedures must be especially troublesome, and we don't have any acquaintances at the bank, nor anything to pledge to the bank. Could we get a loan just because we wanted one? When we urgently needed money, we just borrowed from relatives and friends."

"Then why did you take out a loan this year?" "It's more convenient, of course. If you want a loan, just go to the 'village chief.'"

For a loan, you don't go to the bank president, you go to the "village chief." This change comes from the pilot of the "rural financial self-governance" model carried out by Agricultural Bank of China in Zhejiang.

Lin Xiaokuai, director of Taotou Village, speaks quickly and directly: "Last year our village was rated by ABC as a 'rural financial self-governance village,' and we were given a credit line of 35 million yuan. When villagers need a loan, they only need to find 5 jointly guaranteeing villagers in the village, and then the 'village two committees' review and publicly announce it. Once ABC's review is passed, they can get the loan. The processing procedure is very simple."

According to this model, Chen Huafa obtained a loan of 200,000 yuan. Nearly 200 other villagers in the village also obtained loans like Old Chen. The lowest credit limit for a single household was 50,000 yuan, and the highest was 300,000 yuan.

Lin Xiaokuai said that compared with previous micro-loans, loans under the "rural financial self-governance" model are not only more convenient in procedures and larger in credit limit, but also offer more favorable interest rates, with interest calculated by the day at a monthly rate of 6.5 li. It also takes into account the strong seasonal and temporary nature of farmers' use of funds. After a one-time credit authorization, villagers can borrow and repay at any time through the self-service equipment set up by ABC in the village. If they do not borrow, no interest is calculated, which is equivalent to villagers having a large sum of flexible money on hand.

Since taking out a bank loan, Chen Huafa gets up at 4 or 5 every day and goes to the fish pond to feed, clean the pond and set nets. "Now I have to be more attentive than before. If I delay repaying the bank loan, it won't affect only my own credit."

The "village two committees" become a bridge between farmers and banks, specifically addressing the "five difficulties" of farmer loans

For a long time, hard loans and expensive loans have restricted farmers' right to enjoy financial services. Mao Jiangfeng, deputy director of the Taizhou Banking Regulatory Bureau, believes that on the one hand this is because the supply of rural finance is insufficient, and on the other hand it is also due to serious information asymmetry between banks and farming households.

Feng Jianlong, president of the Zhejiang Provincial Branch of Agricultural Bank of China, said that it is precisely because of information asymmetry that banks face "five difficulties" when making farmer loans: it is difficult to select eligible farming households, difficult to set loan amounts, difficult to manage loan purposes, difficult to reduce management costs, and difficult to control bank risks.

How can the "five difficulties" be solved? Feng Jianlong said, "In its long-term exploration of serving 'agriculture, rural areas and farmers,' ABC found that the 'village two committees' are best suited to become a bridge between farmers and banks." Because they have long been rooted among the villagers, the "village two committees" best understand the villagers' character and credit, are best able to manage rural property rights, most hope villagers will become prosperous, are best able to identify farmer loan risks in a timely manner, and are best able to assist banks in resolving farmer loan risks.

Starting from the "five bests" of the "village two committees," in the second half of 2013 ABC began piloting the rural financial self-governance model. Feng Jianlong said that the core of rural financial self-governance is the "six self" process. "Customers self-recommend": farming households submit loan needs to the "village two committees," and after public screening the "village two committees" recommend honest farming households to ABC; "guarantee self-organization": farming households provide guarantors recognized by the "village two committees"; "borrowing on their own": after the loan is reviewed and signed with ABC, farming households can obtain loans at any time within the credit limit and term through channels such as "Huinongtong"; "self-disciplined use of funds": villagers conduct self-management, self-restraint and self-supervision over loans to ensure loans are used for lawful production and business operations and living consumption; "self-service": farmers can handle matters through "Huinongtong" machines without leaving the village; "self-motivation for keeping promises": the preferential credit limits and interest rate discount margins that ABC provides to each village and each farming household are directly linked to their respective financial self-governance conditions. The better the self-governance, the more preferences obtained.

In response to the occasional risks in the guarantee chain of jointly guaranteed loans, some people also asked whether rural financial self-governance, with village self-governance and farmer joint guarantees at its core, would repeat the same mistakes. If some village-level organizations lack cohesion, would it cause abuse of financial power and lead to moral hazard?

Jin Yueqiang, president of the Taizhou Branch of Agricultural Bank of China, said that rural financial self-governance has made detailed plans in terms of credit limits, selection of pilot villages, and serving farming households in order to prevent risks. In terms of credit limits, rural financial self-governance exercises total volume control, generally within 100,000 yuan per household, and no more than 300,000 yuan at the highest according to business scale. Based on calculations and pilot conditions, farming households have repayment capacity, so it will not lead to guarantee chain risks. When selecting pilot villages for financial self-governance, attention is paid to whether the village self-governance structure is lawful and complete, and whether the "village two committees" have strong public credibility and cohesion. In addition, information such as villagers' credit is included in the scope of credit assessment.

Lin Xiaokuai said that after the village committee posted a loan notice in the village in February this year, nearly 300 households expressed interest in loans all at once. "The village set one principle: only support aquaculture households; those who want to take loans to start enterprises or do business will absolutely not be approved." Seeing the attitude of the "village two committees," dozens of households withdrew their applications. After detailed deliberation on villagers' loan applications, the "village two committees" also rejected more than a dozen applications.

It is understood that the pilot "rural financial self-governance" model has now been extended to 205 administrative villages in Zhejiang. As of the end of September, the loan balance of these self-governance villages reached 715 million yuan, benefiting 5,858 farming households, with not a single overdue loan.

It helps solve farmers' guarantee difficulties, promotes the building of the rural credit system, and brings multiple benefits to rural areas

The reporter's investigation found that by promoting the rural financial self-governance model, it not only facilitates farmer loans, but also helps solve farmers' guarantee difficulties and promotes the building of the rural credit system. In Lin Xiaokuai's view, through rural financial self-governance, the service capacity and economic autonomy of the "village two committees" have been strengthened, and trust between the village committee and villagers has increased.

In recent years, with the improvement of urbanization, rural residents' awareness of starting businesses and expanding business scale has gradually strengthened, and the demand for loan financing has become increasingly urgent. But the general lack of effective mortgage guarantees is the bottleneck problem in farmer loans. Feng Jianlong believes that by promoting the rural financial self-governance model, intangible assets such as farmers' conduct in the village, credit, personal ability and family harmony are transformed into social capital that can be used for financing, which can effectively solve the guarantee difficulty, reduce financing costs, and make farmer loans more convenient and quicker.

According to the "Implementation Plan for the Rural Financial Self-Governance Model" issued by the Zhejiang Branch of Agricultural Bank of China, the valid term of a financial self-governance village is three years, during which ABC gives the self-governance village preferences such as increased loan limits and lower loan interest rates based on farmers' promise-keeping conditions. If multiple people in the village become overdue or loans are not repaid for more than three months after becoming overdue, the preferential conditions will be canceled, and if non-performing loans exceed a certain amount, an exit mechanism will also be launched. This made villagers realize that "credit is worth ten thousand in gold." Lin Xiaokuai said, "Now if one person acts as a 'deadbeat,' the whole village will not agree. Because one household's credit will affect the credit rating of the whole village."

However, rural financial self-governance has also encountered some difficulties in the process of implementation. Feng Jianlong said that taking Yongkang as an example, the whole county has more than 700 villages, but ABC has only 18 physical outlets and more than 60 account managers. With limited manpower serving so many villages, the costs of time and transportation are very high. As a breakthrough for inclusive finance, rural financial self-governance must let farmers truly benefit, and also enable banks to achieve profitable business and guaranteed repayment, so as to ensure sustainable development and protect financial institutions' enthusiasm for serving "agriculture, rural areas and farmers."