Big market space for agricultural machinery leasing, still awaiting deep cultivation
Exploring financial leasing services for "agriculture, rural areas and farmers" -- the big market for agricultural machinery leasing still awaits deep cultivation
China's agricultural machinery production and sales market is vast, but purchasing power for agricultural machinery is weak, while agricultural machinery leasing can amplify agricultural production capital and effectively promote advanced agricultural machinery, and its role should not be underestimated. However, affected by factors such as market fluctuations and policy regulation, carrying out agricultural machinery leasing still faces some obstacles, requiring new institutional design and the refinement and implementation of relevant policies.
Not long ago, through sale-and-leaseback, Xiangfa Agricultural Machinery Cooperative in Sanhe Town, Hongze County, Jiangsu Province signed a lease contract for 28 pieces of agricultural machinery and equipment with Suzhou Financial Leasing, putting them to use in time for the busy farming season. In recent years, financial leasing institutions have paid increasing attention to how to better serve "agriculture, rural areas and farmers." Last year, the General Office of the State Council issued the Guiding Opinions on Promoting the Healthy Development of the Financial Leasing Industry, proposing to encourage financial leasing companies to leverage advantages such as financing convenience, flexible terms and financial optimization, develop products and services suited to the characteristics of "agriculture, rural areas and farmers" at fair prices, and actively carry out pilot financial leasing of large agricultural machinery. At present, what explorations have been made in financial leasing for serving "agriculture, rural areas and farmers," what results have been achieved, and what problems remain? Regarding this, reporters from Economic Daily interviewed industry insiders.
Leased items mainly agricultural machinery
During interviews, heads of several financial leasing companies said that because the main machinery and equipment in agricultural production are agricultural machinery, financial leasing services for "agriculture, rural areas and farmers" are currently mainly agricultural machinery leasing.
"According to the plans and requirements of the National Agricultural Sustainable Development Plan (2015-2030) and the<中国制造2025>Technical Roadmap for Key Areas (2015 Edition), by 2020 the comprehensive mechanization level of cultivation, planting and harvesting of major crops will reach above 68%, the total output value of the agricultural machinery industry will reach 600 billion yuan, and the market share of domestically produced agricultural machinery products will be above 90%." said Li Li, president of Harbin Bank Financial Leasing. Compared with China's huge agricultural machinery production and sales market, purchasing power for agricultural machinery is somewhat weak, and even if fiscal subsidies are given for agricultural machinery purchases, this situation cannot be reversed in the short term. This provides broad space for fully leveraging the role of agricultural machinery leasing.
It is understood that agricultural machinery leasing directly serves agricultural production entities and can channel funds to serve "agriculture, rural areas and farmers" in a targeted way; through the financial leverage effect of agricultural machinery leasing, agricultural production capital can be amplified, forming economies of scale; at the same time, agricultural machinery leasing can effectively promote advanced agricultural machinery, thereby raising the level of agricultural production.
According to Zhang Yiqin, president of Jiangsu Financial Leasing, the agricultural machinery leasing business involves three parties, namely the lessor, the lessee and the manufacturer or its dealer. The general process is that the manufacturer or its dealer forms a purchase intention with the farmer, and the farmer (lessee) submits an order request to the financial leasing company (lessor); the financial leasing company, according to the request, signs a Sales Contract with the manufacturer or its dealer and pays for the goods; the financial leasing company directly leases the purchased equipment to the farmer, and both parties sign a Lease Contract and perform their obligations according to the agreement.
In addition, there is also a sale-and-leaseback method. Simply put, the lessee sells agricultural machinery and equipment to the financial leasing company and then leases them back from the financial leasing company, paying rent according to the Leaseback Contract, which can be used to revitalize assets.
Financial leasing companies are also seeking other models for serving "agriculture, rural areas and farmers." For example, Jiangnan Financial Leasing tried a 200 million yuan biological asset sale-and-leaseback business at the beginning of this year, with tea trees as the leased items and a term of 3 years; Harbin Bank Financial Leasing supported the funding needs of Dazhuangyuan Meat Industry Company, a well-known beef import trader in Heilongjiang Province, using 2,720 imported cows and young beef cattle with relatively high market value as living biological leased items, providing 33 million yuan in financial leasing services.
Gao Yixiang, vice president of Jiangnan Financial Leasing, said that using biological assets as leased items involves many difficulties, such as value determination of biological assets, ownership registration of biological assets, and insurance and disposal issues of biological assets. Therefore, Jiangnan Financial Leasing has not yet carried out such business on a large scale and plans to advance it gradually when conditions mature.
Business expansion awaits policy support
"At present, the use of agricultural machinery is expanding toward a large number of small and medium-sized enterprises and farmers, which brings no small challenge to the expansion of agricultural machinery leasing business and risk control." said Sheng Hua, vice president of Suyin Financial Leasing. Carrying out agricultural machinery leasing for widely distributed and numerous individuals, farmers and small collective enterprises places higher demands on financial leasing companies' business expansion capacity, customer service capacity and risk management capacity.
Affected by factors such as market fluctuations, policy regulation and information asymmetry, carrying out agricultural machinery leasing will face credit risk, operational risk and policy risk. Zhang Yiqin said that Jiangsu Financial Leasing selects high-quality manufacturers for cooperation, controls risk from the source, and based on mid-to-high-end agricultural machinery and equipment, uses leased items to reduce risk, optimizes business operating procedures, and prevents risk through institutions.
Li Li said that monitoring leased items and monitoring funds in leaseback business are also challenges faced by financial leasing institutions. In addition, the value of a single leased item in agricultural machinery leasing is relatively small, end users are relatively scattered, and complex risk management plans are usually costly.
Wang Huijing, assistant to the president of Suzhou Financial Leasing, said that for financial leasing companies, because lessees in agricultural machinery leasing are scattered and most lessees have no past credit records, identifying, screening and determining lessees is very important for financial leasing companies.
At present, financial leasing institutions also face some policy obstacles in carrying out agricultural machinery leasing. Zhang Yiqin said that according to the Interim Measures for the Administration of the Use of Special Funds for Subsidies for the Purchase of Agricultural Machinery, the supplier submits settlement applications to the provincial agricultural machinery competent department on a regular basis with the subsidy agreement and invoice stubs. When carrying out agricultural machinery leasing in the direct leasing model, the value-added tax invoice is issued by the dealer, and the invoice title is not the individual farmer, which does not meet the subsidy requirements. In agricultural machinery leaseback business, first, ownership faces uncertainty, and second, it is subject to the restriction that it may not be transferred within 2 years, because according to relevant regulations, agricultural machinery purchased with subsidies may in principle not be resold or transferred within 2 years. "It is suggested that agricultural machinery leasing business be included in fiscal subsidy targets, and that direct agricultural machinery leasing and agricultural machinery leaseback business be encouraged."
"Although the Guiding Opinions on Promoting the Healthy Development of the Financial Leasing Industry stipulates that actual users of leased agricultural machinery and other equipment are allowed to enjoy agricultural machinery purchase subsidies according to regulations, because there are no specific implementation rules, farmers who are actual users rather than owners of agricultural machinery may be unable to receive agricultural machinery subsidies." Wang Huijing said that if the leaseback method is adopted, financial leasing companies, in order to prevent lessees from illegally selling and disposing of agricultural machinery during the lease term, need to go to the agricultural machinery management department to handle agricultural machinery mortgage registration procedures, but financial leasing companies, as owners of the agricultural machinery, cannot handle procedures to mortgage their own agricultural machinery to themselves. "Solving the above problems requires new institutional design and the refinement and implementation of relevant policies."