Where does agricultural support lending get stuck? Unblocking the lifeblood of rural finance

The sun blazed like fire, and Deng Changhua was burning with anxiety. At the base of the Changhua Nursery Company in Qushui Village, Zhangshu City, Jiangxi, more than half of the 20-plus seedling greenhouses were dilapidated, and Deng Changhua, as the company manager, was busy repairing them with the workers. “After eight or nine years of use, these greenhouses should have been retired long ago, but replacing them with new ones would cost more than 300,000 yuan. Getting a loan is not easy, so we just have to make do.” she said with a bitter smile.

In 1999, Deng Changhua and her husband rented 5 mu of land in the village and started a small nursery. After years of effort, the nursery expanded to more than 100 mu. “Only after reaching a certain scale did I feel how hard it is for farmers to get money.” Deng Changhua recalled that in 2010 the company received a large order that required advancing funds first. She took out all her savings and borrowed from everyone she could, but was still more than 400,000 yuan short, so she decided to seek a bank loan. “With so many banks, getting a loan should not be a problem. Only after trying did I realize that for farmers seeking a loan, ‘it is not easy to say I love you.’”

Deng Changhua first went to several state-owned commercial banks for consultation. As soon as they heard it was an agriculture-related loan, they refused without a second word. Then she approached several joint-stock banks and small loan companies, but was scared off by the interest rates: “In the past, when borrowing from a credit cooperative, a monthly interest rate of 8 li already felt high, while some commercial banks charge more than 1 fen per month plus other fees, and private small loan companies go as high as 2 to 3 fen. For those of us in agriculture, the money we earn is not even enough to pay the interest.”

Deng Changhua was unwilling to give up and asked around for connections everywhere. She finally found a leader working at a bank, said a great deal of good words, and only then did the other party agree to help. But a few days later, they called and said: the bank requires collateral for loans; to borrow 400,000 yuan, at least two commercial residential properties were needed as collateral. “My family only has one house in the city. Where could I find another one? There was no way but to beg my older sister to mortgage her house as well.”

It was not only the high threshold for borrowing; the cumbersome loan procedures also vexed Deng Changhua. “In order to get the loan, I ran around all day, going to more than 10 departments. One moment I was filling out forms at this window, the next I was looking for that department to stamp a seal; one moment I was signing here, the next I was pressing a fingerprint there…… After finally getting all the materials together, approval took more than 20 days. The whole process dragged on for a month and a half, and I lost a lot of weight.”

Since starting the company, she had encountered this kind of experience 3 times, which left Deng Changhua physically and mentally exhausted, and at the same time full of hope: “Aren’t farmers being encouraged to develop modern agriculture? Why is it still so hard to get money? If banks could think about farmers, with lower interest rates, fewer thresholds, and simpler procedures, agriculture could become a promising industry, and our days would become more and more worth looking forward to.”

Unblocking the lifeblood of rural finance

How expensive are loans for farmers?

In some places, the comprehensive financing cost reaches an annual interest rate of more than 16%, which most enterprises and farmers cannot bear

Right now, the problems of difficult and expensive loans are deeply troubling the real economy. A recent survey by reporters found that although the state continues to increase financial support for agriculture, in rural areas, difficult and expensive loans remain a long-standing problem.

Xu Qinghua is a pig farmer in Xu Family River Village, Qiliping Town, Hongan County, Hubei Province. Because he had no working capital to buy feed, he could only painfully sell piglets weighing just over 30 jin. He said helplessly: “If I could get a loan, part of the money would buy feed for fattening, and another part would introduce fine pig breeds. Over these years, I definitely could have made money.”

Rural small and micro enterprises also face financing difficulties. Zhu Xiaoyun started a pickled vegetable production factory in Liuji Town, Zhongmu County, Henan. Over the years she had always wanted to expand the scale, but suffering from a lack of collateral, she had never been able to get a loan.

The problem of expensive loans is equally prominent. Wang Zhaoping, director of the Henan Provincial Department of Industry and Information Technology, found through research that interest rates on loans to small and micro enterprises generally have to float upward by more than 30% over the benchmark rate. Due to the lack of collateral such as fixed assets, many also have to seek guarantee companies, at a cost of at least 3%. Many enterprises still receive 90-day acceptance bills, which generally also require a 3% discount. In this way, the comprehensive financing cost reaches an annual interest rate of more than 16%.

Bie Bixiong, mayor of Xiangyang City, Hubei Province, introduced that when enterprises apply for loans, some banks also put forward requirements such as purchasing wealth management products or completing deposit tasks. When a loan becomes due, enterprises often have to find high-cost “bridge” funds to repay it first. Once the bank does not renew the loan in time, the enterprise may suffer a break in its capital chain because of this.

“Few small and medium-sized enterprises can bear such high financing costs!” said Liu Liang, executive deputy county magistrate of Ningxiang County, Changsha City, Hunan Province. Expensive financing leaves small and medium-sized enterprises unable to bear the burden, and at present more than 50% of the county’s small and medium-sized enterprises are operating at a loss.