Serving Agriculture, Rural Areas and Farmers: Five Relationships Must Be Handled Well

“Agriculture, rural areas and farmers” financial services are a worldwide challenge. Large commercial banks span both urban and rural areas; in serving “agriculture, rural areas and farmers,” besides facing universal financial difficulties such as the weak nature of customers and multiple risks, they also face special challenges including the urban-rural dual structure versus integrated operations, the particularity of the financial needs of “agriculture, rural areas and farmers” customers versus standardized operations, and the dispersion of “agriculture, rural areas and farmers” business versus centralized management. From the practice of Agricultural Bank of China, large commercial banks serving “agriculture, rural areas and farmers” must focus on handling the “five relationships” well.

Commercialized Operations and Fulfilling Social Responsibility

Increasing financial support for “agriculture, rural areas and farmers” is an important part of financial institutions fulfilling their social responsibility. At the same time, as the reform and development of “agriculture, rural areas and farmers” continue to accelerate, financial institutions providing commercialized services to “agriculture, rural areas and farmers” face more opportunities. Financial institutions should seize this opportunity, balance the relationship between commercialized operations of “agriculture, rural areas and farmers” business and social responsibility, and achieve both economic and social benefits.

Since its shareholding reform and listing, Agricultural Bank of China has adhered to the principle of not changing the direction of serving “agriculture, rural areas and farmers” through the shareholding reform and not reducing the intensity of serving “agriculture, rural areas and farmers” through listing. While actively increasing investment in “agriculture, rural areas and farmers” business, it has continuously improved the sustainable development capacity of “agriculture, rural areas and farmers” business. As of the end of June 2014, Agricultural Bank of China's balance of agriculture-related loans reached 2.3 trillion yuan, an increase of 1.4 trillion yuan compared with the end of 2008 (after stripping out through the shareholding reform); the balance of farmer household loans reached 555.3 billion yuan, providing financial support to more than 10 million farmer households; the balance of county-level small and micro enterprise loans reached more than 430 billion yuan, supporting more than 600,000 customers; the loan balance in 14 contiguous poverty-stricken areas reached 429.4 billion yuan, strongly supporting local economic development; basic financial services covered all counties nationwide and 70% of administrative villages, making outstanding contributions to improving the payment and settlement system in rural areas. At the same time, the contribution of Agricultural Bank of China's “agriculture, rural areas and farmers” business to the whole bank has continued to rise, achieving controllable costs and risks, and its capacity for sustainable commercial development has continued to improve.

Agricultural Bank of China will always adhere to the organic unity of “orienting toward agriculture, rural areas and farmers” and “commercial operations,” continuously increase investment in “agriculture, rural areas and farmers,” and further enhance the value creation capacity of “agriculture, rural areas and farmers” business. First, implement the national policies and measures supporting “agriculture, rural areas and farmers” and the real economy. Focusing on supporting grain production and procurement and agricultural infrastructure construction, increase support for key areas and weak links in “agriculture, rural areas and farmers” development. Actively support backbone enterprises and projects located in counties, strive to promote the construction of a specialized small and micro enterprise system, and further support the economic transformation and upgrading of counties and the accelerated development of small and micro enterprises. Second, actively practice the responsibility of inclusive finance. Further increase the construction of “Jinsui Huinong Tong” service points to enhance the convenience for farmers to enjoy financial services; actively strengthen cooperation with local finance departments to further expand the scope of poverty alleviation and farmer enrichment loans; for the 14 contiguous poverty-stricken areas, issue dedicated poverty alleviation plans respectively to further improve service levels. At the same time, use inclusive finance business as a starting point to expand the customer base and lay the foundation for future development. Third, strive to improve the value creation capacity of “agriculture, rural areas and farmers” business. Actively seize mid- and high-end customers in counties to increase the proportion of high-quality customers; conform to the trend of interest rate marketization, implement differentiated pricing by region, by business and by customer, continuously strengthen pricing management, improve overall profitability, and create conditions for better fulfilling social responsibility.

Overall Coordination and Differentiated Management

“Agriculture, rural areas and farmers” customers differ greatly from urban customers, and the operating model of urban finance cannot adapt to the financial needs of “agriculture, rural areas and farmers” customers. For large commercial banks to serve “agriculture, rural areas and farmers,” they must make differentiated institutional and mechanism arrangements for “agriculture, rural areas and farmers” business under the bank's unified management framework.

To effectively achieve differentiated management of “agriculture, rural areas and farmers” business, Agricultural Bank of China implemented the reform of the agriculture, rural areas and farmers financial business division system. In terms of management system, it built an organizational structure of “three-level supervision and one-level operation,” determined clear management and business boundaries, and continuously enhanced the service capacity and operational vitality of county branches. In terms of operating mechanisms, it implemented “six separate” policies for the agriculture, rural areas and farmers financial business division, including separate capital management, credit management, accounting, risk provisioning and write-offs, fund balance and operations, and assessment incentives and constraints. In terms of credit policy, it built a “trinity” credit policy and institutional system “led by annual credit policy guidelines, based on agriculture-related industry policies, and focused on differentiated regional credit policies,” and established a differentiated credit management system for “agriculture, rural areas and farmers” business. Practice has proved that the reform of the agriculture, rural areas and farmers financial business division system has provided strong support for Agricultural Bank of China's service to “agriculture, rural areas and farmers.”

On the basis of strengthening overall coordination across the bank, Agricultural Bank of China will further increase differentiated management of “agriculture, rural areas and farmers” business. First, further deepen and expand the reform of the agriculture, rural areas and farmers financial business division system. Roll out the reform of the agriculture, rural areas and farmers financial business division system across the whole bank and further expand the scope of reform. Optimize and adjust departmental responsibilities, improve relevant operating mechanisms, and further enhance the level of specialized management. Second, strengthen the top-level design of differentiated policies. Systematically review problems existing in “agriculture, rural areas and farmers” credit systems, business processes, assessment incentives and other policies, focus on optimizing and adjusting them, and enhance their applicability. Third, guide differentiated development of county branches. Guide county branches in the eastern region to actively seize new opportunities arising in the process of economic transformation and upgrading and urban-rural integration; encourage county branches in Xinjiang, Yunnan, Northeast China and other regions to increase support for modern agriculture, specialty agriculture and the like; urge county branches in major grain-producing provinces in the central region to make new contributions in implementing the national food security strategy and supporting grain production.