Private lending remains the main channel for farmers' financing
“Nowadays, farming alone can easily cost hundreds of thousands of yuan, and the loan matter still has no clue.” Recently, Zhang Tuanjie, head of the Xiangrui Agricultural Planting Cooperative in Shiyuan Township, Qi County, Henan Province, was quite helpless. The Qi County Rural Credit Union, which has been reluctant to grant loans, also has its own difficulties: besides the borrower having few collateral assets, the vegetable planting industry is also easily affected by natural disasters and sales difficulties, making it an industry with relatively high costs and high risks. Farmers' “difficulty in getting loans” and the rural credit union's “difficulty in granting loans” seem like two ropes tied into a dead knot, impossible to cut or untie, restricting farmers from becoming wealthy and the rural credit union's own development.
Since the beginning of this year, small and micro enterprises and “agriculture, rural areas and farmers” and other weak links have been key areas supported by the state's macro-control policies. The recent “Guiding Opinions on Taking Multiple Measures to Focus on Alleviating the Problem of High Financing Costs for Enterprises” issued by the General Office of the State Council proposed actively and steadily developing specialized small and medium-sized financial institutions serving small and micro enterprises and “agriculture, rural areas and farmers,” and increasing financial supply. How to resolve the coexistence of the two difficulties of “difficulty in getting loans” and “difficulty in granting loans”? The reporter conducted in-depth interviews in Henan.
Farmers' “difficulty in getting loans”:
Unable to find guarantors and pledges, private lending remains the main financing channel
Recently, the reporter came to Huangzhuang Village, Shiyuan Township, Qi County. At the base of the Xiangrui Agricultural Planting Professional Cooperative, only about a dozen greenhouses still grow vegetables, and the rest are basically idle. “It's not that I don't want to plant, it's that I really have no money to invest further. One greenhouse requires an investment of nearly 100,000 yuan.” Zhang Tuanjie said.
In 2011, he joined with several villagers to initiate and establish a professional cooperative, transferred more than 100 mu of land, and built dozens of vegetable greenhouses. He had intended to lead the members to wealth, but unexpectedly even daily life fell into difficulty.
Zhang Tuanjie really could not think of any other way, so he could only try his luck at the bank again. He took his business license and land transfer contract agreement and once again went to the Shiyuan Township branch of the Qi County Rural Credit Union.
“Yours cannot be a pledged loan, only a credit loan. The specific amount depends on the final approval, and generally does not exceed 90,000 yuan per household.” The rural credit union loan officer suggested that Zhang Tuanjie find several guarantors with repayment ability, or provide property as security, so that the loan amount could be increased.
“Although my newly built house is worth more than 200,000 yuan, it cannot be mortgaged. The bank asked me to find guarantors, but I have already borrowed from all my relatives and friends in good economic condition, and the rest do not meet the guarantee conditions.” Zhang Tuanjie told the reporter that, to go a step further, even if the credit loan were approved, a few tens of thousands of yuan would be a drop in the bucket.
The reporter learned from the Qi County Administration for Industry and Commerce that since 2007, the county has registered 1,692 various types of professional cooperatives. The various “difficulties” Zhang Tuanjie encountered in obtaining loans are a microcosm of farmers' financing difficulties.
“Some cooperatives do not operate in a standardized way themselves and do not have sound financial data, so financial institutions' concerns are understandable.” Li Feng, head of the Chunfeng Fruit and Vegetable Professional Cooperative in Zhongmu County, Zhengzhou, told the reporter that at present the main financing channel for members is still private lending.
The rural credit union's “difficulty in granting loans”:
Heavy historical burdens, unsmooth systems and mechanisms, and incomplete laws and regulations
Farmers complain of “difficulty in getting loans,” and rural credit unions also have their own difficulties. “For the emergence of the ‘two difficulties’ situation, it is indeed a bit unfair to put all the blame on the rural credit unions.” Lu Yi, Party secretary and chairman of the Henan Provincial Rural Credit Union, believes that rural credit unions, as the main financial force for rural economic and social development, bear important social responsibilities.
It is understood that for a long time, because the rate of return on agriculture has been relatively low, some state-owned commercial banks began to withdraw rural outlets. The rural credit unions, carrying heavy burdens, continued to expand the scale of their outlets and broaden the areas of support for agriculture.
“Affected by multiple factors, rural credit unions carry relatively heavy historical burdens, and non-performing loans cannot be stripped off and can only be resolved by themselves; at the same time, there are also prominent problems to varying degrees, such as unsmooth systems and mechanisms, imperfect corporate governance structure, weak internal control systems, and business methods that are difficult to adapt to the requirements of modern economic and social development.” Dong Jinquan, chairman of the Zhengzhou Suburban Rural Credit Union, told the reporter.
“For example, when acting as an agent for distributing various fiscal subsidies related to agriculture, the funds must be paid directly into each farmer's account. The cost for each township rural credit union to print passbooks is 30,000 yuan. With more than 2,000 townships across the province, not counting labor costs, not counting the losses from normal business being affected and business development being hindered, the direct cost alone requires 60 million yuan. It is a loss-making endeavor just for the sake of appearance.” Lu Yi calculated an account for the reporter.
“Rural credit unions can only operate within their own county area; this is determined by the systems and mechanisms. If restructured into a rural commercial bank, they could break through regional restrictions to develop business, thereby enhancing comprehensive strength, reducing operational risks, and digesting non-performing assets.” Lu Yi concluded that the real crux of the coexistence of the “two difficulties” lies in two points: one is insufficient collateral, and the other is that a risk transfer mechanism has not been formed.
Ding Jihong, chairman of the Zhongmu County Rural Credit Cooperative Union, which is preparing to establish a rural commercial bank, said that because the relevant financial laws and regulations are not complete, policies still face many difficulties in implementation. For example, regarding the use of rural land contractual management rights, forest rights, and contracted land income rights as collateral, national policy supports it, but the Guarantee Law clearly states that the land use rights of cultivated land, residential land, private plots, and private hills owned collectively may not be mortgaged, and the Property Law also continued this provision.
How to untie the knot of the “two difficulties”:
Revitalize rural assets, improve agricultural insurance, and advance the reform of rural credit unions
“Issues such as the positioning of rural credit unions and shareholding system reform still lack top-level design.” In Lu Yi's view, to resolve the coexistence of the “two difficulties,” there is no choice but to keep exploring, continue reforming, and constantly improve through innovation.
“To solve farmers' ‘difficulty in getting loans,’ the first thing is to solve the problem of insufficient collateral. The state should promptly complete relevant financial laws and regulations, speed up the confirmation of rural land rights, and start with tangible resource assets such as rural houses, orchards, mountain forests, and large agricultural machinery to revitalize rural resource assets and turn ‘invalid assets’ into ‘valuable assets.’” Ding Jihong said that at the same time, support should be given to developing various forms of agricultural insurance to enhance the stability of farmers' income and solve the problem of high risks in agricultural production.
“To solve the rural credit unions' ‘difficulty in granting loans,’ it is necessary to support rural credit unions in carrying out reform and innovation within the scope of policies and service licenses, and solve the problem of insufficient self-development capacity of rural credit unions. Among the 142 rural credit unions in Henan Province, 30 have already been restructured into rural commercial banks, adhering to the principle of changing the system without changing the surname, and changing the name without changing the direction.” Wu Peng, deputy director of the office of the Provincial Rural Credit Union, told the reporter that restructuring is only a market-oriented means to effectively resolve historical burdens, increase capital and expand shares, optimize the equity structure, effectively increase the supply of county-level funds, and enhance operational vitality.
Kang Fengli, chairman of the Yichuan County Rural Commercial Bank, introduced that in order to support the development of specialty agriculture in Yichuan County, as of now, the balance of various loans is 8.6 billion yuan, accounting for 68% of the county's financial market share.
“The state can also give more support to agriculture-related loans in terms of costs, such as reducing the operating costs of agriculture-related financial institutions through tax incentives and fiscal subsidies.” Dong Jinquan said.
“When conditions are ripe, rural credit unions should promptly establish a unified legal-person rural commercial bank and truly build an internal mechanism that meets the requirements of a modern joint-stock commercial bank.” Ding Jihong suggested that only by effectively advancing shareholding system reform, strengthening the construction of corporate governance structure, and continuously improving the internal control system can various risks be prevented and operational efficiency be improved.