The advantage of a village bank lies in being small and stable

Since the founding of China's first rural mutual fund cooperative in 2007, rural mutual fund cooperatives have been developing in our country for 7 years, and there are currently 49 of them. The Yimin Rural Mutual Fund Cooperative in Cangxi County, Sichuan Province, located in a remote mountain village, is one of them, and it has been operating for 7 years now. Do rural mutual fund cooperatives have fertile ground in our country's countryside? Can they be sustained? The practice of the Yimin Rural Mutual Fund Cooperative in Cangxi County provides a vivid footnote.

What can a mutual cooperative do?

Building a house, buying piglets, even travel expenses for going out to work can all be loaned

At noon on an autumn day, with the sun blazing, Gao Zeming, a villager from Group 2 of Wenping, Yuedong Town, Cangxi County, sat under the eaves of the corridor of his son Gao Yong's house, registering the villagers' field plots. Seeing Jin Jigui, chairman of the Yimin Rural Mutual Fund Cooperative, arrive, Gao Zeming greeted him warmly: "If it weren't for the cooperative's loan, this building couldn't have been built." His family borrowed a total of 45,000 yuan from the cooperative in succession to build the house.

For farmers short of funds, mutual cooperatives often play the role of providing timely help. Jin Jigui introduced that the smallest loan issued by the cooperative was 200 yuan. In 2010, a villager from Taiyang Village borrowed 200 yuan from the cooperative to buy piglets. The Wenlin area has more than 1,000 people going out to work each year; at the beginning of the year they borrow more than 1,000 yuan for travel expenses, and when they earn money from working and send it back, they repay the account. After the cooperative was established, it also actively sought loans from the government for national farmland improvement projects, and obtained agriculture-related loan subsidies for members adjusting the agricultural industrial structure. As of the end of 2013, the cooperative had cumulatively issued 6.18 million yuan in fiscal subsidy loans to members, and members received 185,000 yuan in fiscal interest subsidies.

In 2007, the Yimin Rural Mutual Fund Cooperative in Cangxi County was established. Jin Jigui said that in 2003, Wenlin Township was merged into Yuedong Town, and the only financial institution in the entire township, the rural credit cooperative, went away with it. Cangxi is also a typical hilly county, with a large territorial area; Wenlin Township is 65 km from the county seat and 19 km from the nearest township, making it extremely inconvenient for villagers to deposit and withdraw money. The mutual fund cooperative emerged as the times required.

For villagers in remote mountain villages, this was a new thing; some joined the cooperative with a try-it-and-see attitude, while others were still waiting and watching. At that time, 1,767 households from 10 villages in Wenlin Township joined the cooperative, with share capital of 310,000 yuan.

At the beginning of its establishment, the mutual fund cooperative only carried out deposit, loan, and remittance business. In 2009, the cooperative negotiated with an insurance company and acted as an agent for insurance business; in 2010, the cooperative discussed matters with the Civil Affairs Bureau and the Finance Bureau and acted as an agent for paying various government subsidies to members in the Wenlin area; in 2011, the cooperative acted as an agent for electronic remittance business of other banks such as the Agricultural Bank, credit cooperatives, and postal savings, further facilitating members. Liu Minfu, a member from Tianshan Village, said: "This service is great. I no longer have to take a vehicle to a place more than 20 li away to withdraw money."

After 7 years of development, the cooperative has won unanimous recognition from the broad membership through practical actions; members increased from 1,767 households to 2,001 households, with a shareholding rate of 86.8% of the local 2,306 farming households.

As of now, the cooperative's total assets are 19.01 million yuan, including 12.3 million yuan in loans; total liabilities are 17.41 million yuan, including 12.78 million yuan in deposits; owners' equity is 1.6 million yuan, the capital adequacy ratio is 13.1%, the loan provision ratio is 8.2%, and the provision coverage ratio is 1366%.

How is risk controlled?

Serving only members, villagers participate in monitoring the financial condition of borrowing households

Jin Jigui introduced that the cooperative's deposit interest rate is one percentage point higher than that of the rural credit cooperative, and its loan interest rate is one percentage point lower.

Under low-profit operation, how to control risk is a skill. Wen Weihu, a researcher from the Sichuan Banking Regulatory Bureau who raised the cooperative from its early days, said that when the cooperative was established, financial risk issues were already taken into consideration. To prevent and defuse various risks, the cooperative strictly implements the Interim Provisions on the Management of Rural Mutual Fund Cooperatives, does not operate across business regions or across business scopes, and serves only members. The daily operations of the cooperative are the responsibility of the board of directors, and the board of supervisors is responsible for supervising the board of directors' management and operational activities. The cooperative has established an incentive and restraint mechanism. For members who do not default on loans, a transaction rebate of 10% of the interest is implemented, which can be withdrawn if there is no default for 3 years. For defaulters, the cooperative lowers the credit amount and raises the loan interest rate by 10%.

In view of the fact that the members and staff of mutual fund cooperatives are all laypeople without any experience in operating financial institutions or controlling risk, the Sichuan Banking Regulatory Bureau also introduced a "custodian bank" system during the formation of the Yimin Mutual Fund Cooperative, with the rural credit cooperative of Yuedong Town, Cangxi County, serving as the custodian bank of the mutual fund cooperative, and required the mutual fund cooperative to deposit excess cash on hand or a certain proportion of deposits in the custodian bank. Wen Weihu believes that cooperation between mutual fund cooperatives and rural credit cooperatives can not only monitor the flow of the cooperative's funds, but also help build a sound local financial ecosystem and avoid becoming a purely competitive relationship.

In addition, the mutual fund cooperative has member representatives in each village as liaisons, responsible for monitoring the family circumstances of member borrowing households and the operation of loans; if there is any untrue situation or risk, it will be reported to the mutual fund cooperative immediately. As of now, the cooperative's non-performing loans are only 74,000 yuan.

Regarding the future, Jin Jigui said that the cooperative will increase investment in "agriculture, rural areas, and farmers," expand service coverage, strengthen internal management, and strive to transform the cooperative from "extensive operation of a grassroots bank" into "refined management of a modern new-type financial institution."