Can sweet potatoes be used to repay loan interest?
The Central Rural Work Conference pointed out that "efforts should be made to strengthen the supply-side structural reform of agriculture and improve the quality and efficiency of the agricultural supply system." Taking the opportunity of building a national pilot zone for border financial reform, Fangchenggang City has guided internet finance to "go to the countryside and enter the villages," broadening the channels for agricultural financing and giving back to agriculture, rural areas and farmers. Internet finance, mobile banking and P2P - once buzzwords popular in cities - are now constantly on the lips of local farmers.
Repaying loans with agricultural products, one move solves many difficulties
Niulu Village in Qisha Town, Gangkou District, is a small fishing village backed by mountains and facing the sea, rich in mountain and marine resources. But small-scale planting and breeding can hardly make a difference, while large-scale planting and breeding requires a large amount of capital investment. Agricultural collateral is scarce and loans are hard to obtain. Mr. Ning, who runs ecological agriculture in Gangkou District, Fangchenggang City, Guangxi, wanted to expand his scale but was stumped by the word "money," and agonized over it for a long time. "Applying for a bank loan involves cumbersome approval procedures, harsh lending conditions and a relatively long time before the money arrives," Mr. Ning said. Borrowing from acquaintances was also just a drop in the bucket.
What to do? Departments including the Fangchenggang Financial Office found during on-site surveys in Niulu Village that the local ecology is excellent and the seawater is pollution-free, and that what is grown and raised there are green, pollution-free agricultural products that city people like. Could they make something of this?
After several parties put their heads together, an idea emerged: repayment in kind, that is, investors lend funds to farmers through internet finance companies to solve farmers' financing difficulties; when the loan matures, farmers can repay either in cash or with agricultural products such as sweet potatoes, chickens and ducks, and seafood valued at a price.
Guangzhou Zhenghang Internet Financial Information Service Company (Zhengqin Finance) launched a 300,000 yuan loan project for Mr. Ning called "Zhengqin e-Farm Loan - Hongxiang Sweet Potato." The head of Zhengqin Finance told reporters that when the sweet potatoes are harvested, Mr. Ning only needs to pay Zhengqin Finance 3,600 jin of sweet potatoes to offset the interest on 300,000 yuan for half a year. Zhengqin Finance will then distribute these sweet potatoes to the project's investors. "From initial negotiations to the funds arriving in the account, it took less than 48 hours," Mr. Ning said.
One move solves many difficulties. Fangchenggang Mayor He Chaojian believes that the repayment-in-kind model finds a sales channel in advance for farmers' agricultural products, saving the cost of selling agricultural products while also solving problems such as the difficulty farmers face in raising funds for production and development, the difficulty of activating private capital, the difficulty of adding value to agricultural products, and the difficulty farmers face in entering the market.
"Local ties" as a constraint: defaulters face the sidelong glances of their fellow villagers
Limited by education and life experience, most rural residents lack a strong sense of financial integrity. In addition, much agricultural production still "depends on the weather," and production and sales are uncertain, so there is a possibility of malicious default, evasion of debt and similar behavior. How can the risks of rural internet finance be resolved?
In April 2015, Niulu Village held a villagers' representative meeting. Farmer representatives and village officials discussed issues such as building a concentrated credit village. After intense discussion and a final vote, repaying on time and neither defaulting nor reneging was written into the new "village rules and conventions." From then on, any household that engaged in fake borrowing, reckless spending, or defaulting would face the sidelong glances of fellow villagers.
In rural Fangchenggang, village rules and conventions carry great weight in farmers' hearts. Adapting to local conditions, the area skillfully plays the "local ties" card in building the rural credit system, encouraging villages to add provisions such as resisting default into their village rules and conventions, which take effect after discussion, voting and approval by the villagers' representative meeting, and are specifically supervised and enforced by a council made up of respected villagers' representatives, Party member representatives and village officials.
There is both the "local ties" card and the "mechanism path" of modern management. Fangchenggang was the first in Guangxi to build two municipal-level credit information collection and evaluation system platforms - one for social credit information and one for rural credit information - with credit files for 16 financial institutions, 40 government functional departments, 282 administrative villages and 170,000 farming households, and 1.2 million pieces of credit information connected to the platform, building a credit mechanism with clear rewards and punishments.
At the same time, to dispel investors' concerns, Fangchenggang brought in large state-owned financial enterprises from Guangxi to build an offline multi-financial guarantee system, and the internet finance companies that settled there provide guarantees from third-party guarantee companies. In addition, Fangchenggang effectively grafts policy agricultural insurance and rural commercial insurance onto internet finance, breaking new ground in the fields of surety insurance, credit insurance and other property insurance, and has successively rolled out to internet finance companies various new insurance products such as policy pledge loans, agricultural surety insurance and microcredit insurance, to dispel the worries of internet finance companies.
"We will gradually build a risk management platform with P2P platforms. This platform will involve the government, rural organizations, farmers, P2P companies and insurance companies working together, making it a relatively large risk management platform that helps internet finance companies manage risk to the greatest extent and promotes farmers' benefits and rural economic development to the greatest extent," He Chaojian said.
"Going to the countryside and entering the villages," tapping the blue ocean of rural internet finance
Like Mr. Ning, another beneficiary of internet finance is Huang Ensheng, a "seafood tycoon" from Songbai Village in Dongxing Town. Benefiting from a P2P online lending platform, Huang Ensheng raised 2 million yuan in development funds in just half an hour, giving him investment capital for a border seafood business project he had planned with more than a dozen fellow villagers.
In March 2015, Fangchenggang City joined with Guangxi Financial Investment Group and cooperated with Zhengqin Finance to introduce a P2P online lending platform. By mid-October 2015, more than 30 million yuan had been raised for farmers for production; on October 20, 2015, Fangchenggang held an on-site promotion meeting for a new four-in-one internet rural finance service model of "repayment in kind + village rules and conventions + insurance guarantees + policy guidance." The municipal government signed a cooperation framework agreement with two well-known internet companies from Guangdong and Guangxi, internet finance companies signed financing agreements with a number of farming households worth nearly 10 million yuan, and 2 million yuan in funds was raised on site.
"Internet finance 'going to the countryside and entering the villages' not only provides a new platform for solving the shortage of funds in rural areas, but will also play an important role in solving the rural problems of 'difficulty buying' and 'difficulty selling,' with broad prospects," said Li Zhiyong, deputy director of the Guangxi Financial Office.
Jin Xiangjun, secretary of the Fangchenggang Municipal Party Committee, said: "With the advancement of Fangchenggang's rural financial reform, the quantitative trading system for rural financial property rights and creditor's rights is gradually being established. The financialization of land assets and the completion of the rural credit information system will greatly unleash rural financing demand and are expected to open up the blue ocean market of rural finance."
Industry insiders say internet finance has characteristics such as a low threshold, high efficiency and no geographical or time restrictions, and can better make up for the shortcomings of traditional rural finance. With the spread of the internet, the vast rural market is expected to become the "outlet" of internet finance.
Jin Xiangjun said that Fangchenggang City will continue to step up rural financial reform and give the new internet rural finance business format vigorous vitality: through the building of a rural credit information platform and a rural internet finance trading platform, and relying on data analysis, every transaction record of a farmer will become the credit basis for his or her loans, solving the difficulty farmers and agricultural input dealers face in obtaining loans; by using mobile internet, the Internet of Things, e-commerce platforms, big data and other means, it will raise agricultural production efficiency, reduce production and sales costs, broaden sales channels, and use informatization to drive the great development of smart agriculture.