Although agricultural machinery financial leasing has broken the ice and is moving forward, its development prospects need an east wind
Editor's note: As China's agriculture moves toward large-scale operation and mechanized production, new agricultural business entities such as farmers' professional cooperatives, family farms and large grain growers have an increasingly strong demand for high-performance, compound and intelligent large agricultural machinery. But such machinery costs hundreds of thousands or even millions of yuan, which most people cannot afford. Especially since the gradual implementation of the policy of "full-price purchase of machinery and fixed-amount subsidies", the problem of farmers' shortage of funds for buying machinery has become increasingly prominent. The emergence of agricultural machinery leasing allows farmers to change from "direct purchase" to "lease first, buy later", greatly reducing the pressure of a one-time investment, and is expected to become a way out of the difficulty farmers face in buying machinery and obtaining loans.
The scale of agricultural machinery leasing is expected to reach tens of billions
"With 28 large cotton pickers each priced at 3.2 million yuan, we drove them home after paying 30% as a down payment, and the rest can be paid off in 3 years. If we had to pay the full amount in one go, we could neither come up with so much money nor borrow so much." **Bai Jiuhui, chairman of the Kangwang Agricultural Machinery Professional Cooperative in Sidaohezi Township, Shawan County, said that one cotton picker can earn 800,000 to 1 million yuan a year, so paying it off in 3 years is no problem.
The Kangwang Agricultural Machinery Professional Cooperative is a beneficiary of the agricultural machinery financial leasing pilot project jointly carried out by the Ministry of Agriculture and ABC Financial Leasing Co., Ltd. of Agricultural Bank of China. For agricultural machinery purchased through this pilot project, only a 30% down payment of the full price of the machinery is required, and the remaining payment is paid by ABC Financial Leasing Co., Ltd. of Agricultural Bank of China to the agricultural machinery dealer. The cooperative repays this amount to ABC Financial Leasing Co., Ltd. of Agricultural Bank of China over 3 years, and the 3-year interest will be subsidized by a fiscal project of the Ministry of Agriculture, at which point ownership of the machinery will belong to the cooperative.
As agricultural machinery leasing combines the functions of financing and leasing of goods, it makes it possible for China's new agricultural business entities to "spend little money to accomplish big things." Chen Peihua, president of ABC Financial Leasing Co., Ltd. of Agricultural Bank of China, said that agricultural machinery leasing does not require other collateral, which is much less troublesome than a bank loan. The financing amount of agricultural machinery leasing is far higher than current bank loans, and it can truly solve the funding pressure of buying machinery. Agricultural machinery financial leasing can also choose different down payment ratios and repayment periods according to individual affordability, making it more flexible and the repayment pressure relatively smaller.
A survey shows that in the economically developed Jiangsu Province, 89% of agricultural machinery professional cooperatives or family farms have loan demand for purchasing agricultural machinery, and more than 61% have demand exceeding 1 million yuan. "Although there are subsidies for purchasing agricultural machinery, the majority of farmers still face a funding gap. Due to the lack of collateral and credit records, farmers' difficulty in obtaining loans cannot be solved in the short term. This provides broad space for agricultural machinery leasing to fully play its role, and its market capacity will reach the scale of tens of billions of yuan." said Zhang Yiqin, president of Jiangsu Financial Leasing.
Li Weiguo, director of the Agricultural Mechanization Department of the Ministry of Agriculture, believes that to solve farmers' difficulty in buying machinery, in addition to direct state support, more use should be made of financial means such as financial leasing and financial leasing. In the past two or three years, in **, Heilongjiang and other places, the development of agricultural machinery leasing has begun to show some good momentum and some experience has been explored.
A win-win model is the key to opening the market
The agricultural machinery leasing business has a development history of more than a hundred years in developed countries in Europe and America, and is the preferred way for farmers to purchase and use agricultural machinery and equipment, reaching 60%-70%. In contrast, China's agricultural machinery leasing started relatively late and is still at the stage of government promotion and pilot operation.
At present, among the companies that have opened up a position in the agricultural machinery leasing market, CreditEase Leasing is an outstanding representative. Since its establishment in 2012, CreditEase Leasing has provided agricultural machinery leasing services to nearly 10,000 farmers in more than 30 provinces including Shandong, Heilongjiang and Henan, and has established cooperative relations with nearly 100 domestic and foreign agricultural machinery manufacturers and dealers, involving about 14 major categories and 180 types of agricultural machinery and equipment, which can meet the full-process needs of agricultural production in plowing, sowing, management and harvesting.
"Creating a win-win model of 'farmer-agricultural machinery dealer-agricultural machinery manufacturer' is the key to opening the agricultural machinery leasing market." said Mao Fangzhu, vice president of CreditEase and general manager of the CreditEase Inclusive Finance Leasing Department. Our operating model can be summarized as: "You choose, I pay; the manufacturer handles quality assurance. You lease, I buy; I buy, you must lease. If you want ownership, the rent must be paid off."
Because the farmers leasing agricultural machinery are quite scattered, and most have no past credit records, identifying, screening and confirming lessees is crucial for leasing companies to control risk. "In fact, our direct customers are agricultural machinery dealers, not farmers." Mao Fangzhu said. This is because agricultural machinery dealers are closer to farming households than financial institutions and can find target customers accurately and efficiently. Moreover, if a farming household defaults, after the leasing company retrieves the agricultural machinery, it can cooperate with the dealer to repair and refurbish it for convenient secondary sale.
Agricultural machinery dealers are also happy to cooperate with CreditEase Leasing. "In agricultural machinery sales, sales on credit are quite common, which puts great pressure on our working capital. After CreditEase Leasing intervenes, it will directly pay us the farmers' machinery purchase funds, which both ensures the use of the funds and eliminates the problem of credit sales of agricultural machinery." said Wei Guocheng, general manager of Kezuozhongqi Guohao Trading Co., Ltd. Moreover, when we are short of funds for ordering from agricultural machinery manufacturers, CreditEase will also provide us with financing services.
Most importantly, only by allowing farmers to profit can the whole model operate. CreditEase Leasing has established a "quality blacklist" to prevent farmers from buying inferior agricultural machinery. Around the risks of agricultural machinery operations, CreditEase Leasing has joined with insurance companies to launch related agricultural machinery property insurance and personal accident insurance, among others, to provide farmers with repayment protection. For farming households with good repayment records, CreditEase Leasing will also issue a "Trustworthy Household" certificate, so that when they encounter a shortage of funds in purchasing production materials for breeding or planting, it can also conveniently provide them with financing services.
The industry calls for fiscal interest subsidy support
Data show that the total number of leasing companies in China has exceeded 2,000, with assets approaching 3 trillion yuan, but the number of companies carrying out agricultural machinery leasing business is very small, and their asset scale is also very small. Mao Fangzhu joked with the reporter: "We have almost no competitors in the market, because there are not many financial institutions that truly put effort into it."
As a blue ocean, why is agricultural machinery leasing so little noticed? From the farmers' perspective, China's rural financial environment is relatively backward, and farmers have a vague understanding of the concept of leasing, believing that financial leasing is not very different from bank loans. Compared with ordinary bank loans, the problem of "expensive financing" in leasing is more prominent. Therefore, agricultural machinery leasing is not as attractive to farmers as imagined.
From the perspective of leasing companies, current leasing companies in China can be divided into financial leasing and financial leasing. Those under the regulatory system of the China Banking Regulatory Commission are financial leasing, and those under the regulatory system of the Ministry of Commerce are financial leasing. "There is no essential difference in the nature of the business between the two. In fact, financial leasing companies are mostly state-owned banks pursuing low risk; financial leasing companies funded by private capital pursue high profits." Mao Fangzhu said. Agricultural machinery leasing does not have high profits and carries certain risks, so financial institutions are not very interested.
From a policy perspective, last year the State Council issued the "Guiding Opinions on Accelerating the Development of the Financial Leasing Industry" and the "Guiding Opinions on Promoting the Healthy Development of the Financial Leasing Industry", clearly proposing that actual users who obtain agricultural machinery through financial leasing can enjoy agricultural machinery purchase subsidies, and the provision that ownership may not be transferred within two years has also been abolished. It can be said that there are no longer any policy obstacles to carrying out agricultural machinery financial leasing and agricultural machinery financial leasing.
Chen Peihua believes that as a new thing, agricultural machinery leasing needs a development process and is now in a market cultivation period. Just like agricultural machinery purchase subsidies, the agricultural machinery leasing market needs the pull of a policy "east wind."
Some experts suggest encouraging direct agricultural machinery leasing and agricultural machinery leaseback business through policies such as fiscal interest subsidy support and tax reductions and exemptions; providing a certain form of risk guarantee compensation mechanism to help financial leasing companies resolve risks such as rent arrears that may arise from leasing businesses such as agricultural machinery and tools; and strengthening the construction of the rural leasing market and financial environment to create a good operating environment for the development of agricultural machinery financial leasing.