How can the mortgage rate for farmland loans reach 60%?

The "China Rural Finance Development Report 2015" recently released by the Finance Research Institute of the Development Research Center of the State Council points out that agriculture-related loans, especially farmer household loans, currently face the risk-control difficulty of a relatively high non-performing loan ratio.

The report's analysis holds that the high non-performing ratio of farmer household loans in rural finance is superficially caused by farmers' default behavior, but is fundamentally caused by the limitations of banks' financial service models, such as credit terms being too short and not matching the agricultural production cycle. Under such circumstances, a relatively high non-performing ratio can be said to be inevitable.

Therefore, what rural finance is "anemic" from is not a lack of financial institutions, but a lack of innovation in financial services. The report proposes that in recent years, Internet technology has had an increasingly deep impact on information collection, business costs, product innovation and other aspects of rural financial services, and the role of Internet technology in rapidly advancing rural financial services is becoming increasingly prominent.

In 2015, Zhang Xinmin, a grower in Hanshou County, Hunan, obtained a 150,000 yuan loan using 150 mu of land transferred to him. As the repayment period approached, however, the loach and pearl fish he raised could not fetch a good price, and facing monthly repayment pressure of more than 10,000 yuan, he found himself somewhat unable to cope. The Postal Savings Bank of Hanshou County discovered during post-loan monitoring that this loan might become overdue. If it was only overdue in terms of the earlier timeline, it could be resolved through internal control management and post-loan collection, but what the bank feared most was how the land would be disposed of if the overdue situation dragged on for a long time.

In the end, joining hands with a third party and cooperating with that third party became the way to solve this problem.

Li Jun, president of the Postal Savings Bank Hanshou County Branch, introduced that by cooperating with the nationwide Internet land transfer platform Tuliu.com, the scope of land transfer could suddenly expand from the county to the whole country. After an overdue problem occurs, the problem of rapid disposal no longer worries the bank. On the other hand, for farmers, after local banks entered into tripartite cooperation with the Internet platform, because the risks they bear are greatly reduced, they can give farmers a higher mortgage rate and increase the loan amount, thereby helping large growers solve the problem of funding shortages to a greater extent.

Wu Yong, CEO of Tuliu.com, said that in the past the mortgage rate for management right mortgage loans was generally 50%, while after Hanshou cooperated with Tuliu.com, the mortgage rate could be raised to as high as 60%.