Can Internet Plus open up the "ren and du meridians" of inclusive finance?
Internet Plus: Can it open up the “ren and du meridians” of inclusive finance?
——Research and reflections on financial poverty alleviation through the partnership between Ant Financial and Zhonghe Nongxin
Staff reporter Shi Wei
In rural areas where there is no credit data, how can sustainable financial services be provided? Faced with customers who are numerous and scattered, how can financial institutions effectively reduce operating costs? This has long been the biggest bottleneck constraining the development of traditional rural finance.
In 2015, the internet finance company Ant Financial began cooperating with Zhonghe Nongxin, a microcredit provider, to offer pure credit loans to farming households in rural areas, especially in impoverished counties. A few days ago, the reporter visited its pilot area in Pingjiang County, Hunan. When “internet” is combined with “finance,” what it brings is not only rural families whose fates have been changed by financial services, but also changes in the structure and ecosystem of traditional rural finance and a broader future for financial poverty alleviation.
“As long as your credit is good, you can get a loan.”
“2,752 yuan and 50 cents every month, repaid through Alipay.” Ai Huangxi rattled off a string of numbers without hesitation. This is the loan he has to repay every month, with a principal of 30,000 yuan and a repayment period of one year.
Ai Huangxi is a registered impoverished household in Sanshi Town, Pingjiang County, Yueyang City, Hunan Province. He is already in his forties this year, and his son is preparing to get married. Last year, he and his mother fell ill one after another, and after reimbursement through the New Rural Cooperative Medical Scheme, there were still expenses of more than 100,000 yuan, putting a heavy burden on the family.
“But Brother Ai's family has an especially good reputation in the village.” Loan officer He Jingang said that Brother Ai served in the military when he was young, and his family never needed to be pressed to repay money borrowed from neighbors and friends. On He Jingang's recommendation, Ai Huangxi successfully borrowed 30,000 yuan, and used 17,000 yuan of it to buy a motorized three-wheeler to do transport work. “I can earn 4,000 yuan a month. My wife works at a cooked food factory in the county, so repaying the loan and living expenses are no problem.” Ai Huangxi said.
Ai Huangxi, who normally used to record daily income and expenses with pen and paper, also learned to operate repayments on his mobile phone. When each monthly repayment date came, he always prepared the money in advance and repaid on time.
“As long as your credit is good, you can get a loan.” The person in charge of microcredit in the Pingjiang area for Zhonghe Nongxin told the reporter that the biggest bottleneck restricting farmers' access to financial services has always been the lack of collateral, but the loans they provide require no collateral at all, and the only requirement for a guarantor is good credit, rather than the requirement in many places that the person must be a “government employee,” greatly lowering the threshold for farmers to get loans.
Behind a loan officer's lending choices are a company's values and strategic orientation. Ant Financial and Zhonghe Nongxin: the former is an internet finance company that over the past 5-plus years has already lent more than 700 billion yuan through the internet to small and micro businesses, more than 1/3 of which were agriculture-related loans. The latter is a public-interest microcredit institution focused on rural areas under the China Foundation for Poverty Alleviation, and has been deeply engaged in this field for 20 years.
In November 2015, the two companies began cooperating to help farmers escape poverty through “Internet Plus targeted poverty alleviation,” trying to use their respective strengths and capabilities to blaze a path for inclusive financial services in rural areas.
What sparks can their cooperation strike? “The original model is very difficult to adapt to the rural market”
We often say that farmers are the most creditworthy. But in real life, it is very difficult for farmers to truly obtain financial support on the strength of “credit.” This seems to be a paradox.
The fundamental problem is that, for financial institutions, credit is not an abstract judgment based on experience, but a quantifiable result based on specific data.
Related surveys show that China has more than 50 million poor people, and the vast majority of them have no bank transaction records, no asset certificates, and not much collateral. Chinese farming households have no credit data, which is the biggest bottleneck making it difficult for them to obtain financial services.
In addition, persistently high operating costs further limit financial institutions' enthusiasm for devoting themselves to rural areas. Microcredit loans are not only small in amount, but also high in unit operating cost. Moreover, farmers live scattered and in remote areas. Taking Zhonghe Nongxin as an example, because it provides door-to-door service, the costs of disbursing loans and conducting research are paid by the financial institution.
“In Fujian, many fishermen want to improve their lives by engaging in aquaculture production. When they need funds, we have to take a boat to disburse the loan; in some places farmers live on mountains, and cars cannot drive up, so we need to ride motorcycles to disburse the loan; and in areas like Inner Mongolia, we often have to ride horses. The farthest customer is 635 kilometers from the branch, equivalent to the distance from Beijing to Zhengzhou, and our loan officers need to stay overnight. This kind of service makes our operating costs relatively high.” said Dou Huamao, deputy general manager of Zhonghe Nongxin.
Xinhua News Agency, Changchun, August 12, headline: Watermelon prices like a “roller coaster” melon farmers' joys and sorrows differ
Xinhua News Agency reporters Li Shuangxi and Lin Hong
Recently, several major watermelon-producing areas in Jilin Province experienced a “roller coaster”-like price swing. Within a few days, the price suddenly fell from 0.4 yuan to 7 fen per jin, tens of thousands of jin of watermelons rotted in the fields, and the “old customers” who bought melons collectively disappeared. Why did the price fall to 7 fen this year? The reporter interviewed several major watermelon-producing areas including Taonan, Changling, and Gongzhuling.
Last year 0.7 yuan, this year 7 fen melon farmers want to cry but have no tears
On the 10th, beside the village road in Jinshui Village, Changling County, 1 trailer loaded with 70,000 jin of watermelons was heading to Xinmin, Liaoning. On the face of 36-year-old melon farmer Huang Liu was an expression of wanting to cry but having no tears.
Huang Liu planted a total of 7 hectares of watermelons this year, with a yield of 120,000 jin per hectare and costs of about 30,000 yuan, equivalent to needing to sell each jin of watermelon for about 0.25 yuan. However, this year, his early melons were sold at a time when the price was 7 or 8 fen, and he lost 15 wan yuan in total.
Pointing to the rotting watermelons by the roadside, Huang Liu said that in the past, even the leftover small melons were bought by someone, but this year 30,000 to 40,000 jin were thrown away.
Gongzhuling melon farmer and broker Jiang Hua feels much the same. Last year, merchants buying melons had to pay a 20,000 yuan deposit, and the highest price reached 0.78 yuan per jin, while this year no one wanted them even at 7 fen.
Jiang Hua has more than 30 “old customers,” merchants who have long cooperated in buying melons, from places including Shandong, Hebei, Zhejiang, and Shanghai. Jiang Hua said that in previous years, by July 20, the “old customers” would rush over to buy melons, but this year no matter how many calls were made, no one showed up. With no one buying the watermelons, prices within Jilin Province kept falling.
According to price monitoring by China Good Melon Network, before July 28, watermelon quotes in Jilin Province were 0.3 yuan-0.4 yuan, while after August 2 they generally fell to 0.07 yuan-0.1 yuan. On August 10, prices rebounded to 0.2 yuan-0.25 yuan.
“It's no use even if the price comes back. Most of what we planted this year was early melons, all coming to market in late July and early August. There is hardly anything left now.” Huang Liu said that after growing watermelons for more than 10 years, this was the first time he had encountered such a low watermelon price.
No one from out of town came to buy, and local consumption was limited. Lei Jing, a melon farmer in Shanwan Village, said that 1 truckload of melons is 70,000 jin, sold to the south, two truckloads a day. If they were sold on the local market, even 20 days would not sell 1 truckload, and in the end they would still rot in the truck. For watermelons that are highly dependent on outside markets, if no one buys the melons, it is equivalent to throwing them all away.
Melons everywhere, too many to harvest “Old customers” helpless
“So many, I've never seen so many watermelons, everywhere.” 1 buyer from Xinmin, Liaoning, leaning in his car, said with a helpless expression.
According to reports, watermelon purchasing proceeds from south to north each year. In previous years, early melons made money and late melons lost money, so this year farmers everywhere rushed to plant early melons. In addition, Jilin Province suffered wind and hail disasters of varying degrees in June, delaying the watermelon ripening period, causing early melons in many places to come to market at the same time and prices to plunge.
“Many ‘old customers’ stayed in Liaoning and Inner Mongolia to snap up melons, while remoter Jilin was ignored.” the Xinmin buyer said.
Second, because corn prices fell, Jilin Province reduced its corn planting area and switched to cash crops. Many farming households set their sights on watermelons, which had been “highly profitable” in previous years.
Wang Dahua, manager of Dahua Seed Industry in Changling County, said that 1 box of watermelon seeds can plant 1 mu of land. Last year a total of 4,000 boxes of seeds were sold, while this year it reached 10,000 boxes, equivalent to a six-tenths increase in planting area.
“Many new melon farmers lack sales channels and have no ‘old customers.’ When early melons came to market, they looked everywhere for brokers to sell on their behalf, which also drove down market prices.” Jiang Hua said.
Mastering market sales channels Zhejiang melon farmers do not worry about selling
43 hectares of melon fields form a sea of melons that stretches as far as the eye can see. Pan Xiaochun, a melon farmer from Ruian, Zhejiang, who rents this patch of melon land in Changling County, appears very calm about the rise and fall of melon prices.
Having been an “old customer” for 35 years, Pan Xiaochun has sold watermelons from the Northeast to places including Wenzhou, Jiaxing, and Jinhua in Zhejiang. This year is his first year growing melons, yet he is not worried about losing money because of low prices.
“My greatest asset is not melon-growing technique, but the market.” Pan Xiaochun said that when many melon farmers could not find “old customers” and could only dump watermelons at 7 or 8 fen, he could directly load watermelons onto trucks and sell them to Zhejiang, with an average on-site price of 0.6 yuan per jin, and after deducting transport costs he could still earn 0.2 yuan.
Pan Xiaochun's second experience is to bet on different time periods. In May this year, when he saw melon farmers everywhere rushing to plant early melons, he worried that early melons would be cheap, so he planted only about 5 hectares, and planted late melons on the rest. “I still have more than 30 hectares of late melons unsold, and can catch a good price.”
Pan Xiaochun said that because the watermelon sales chain is long and highly marketized, various middlemen and agents form a huge group and earn agency fees, “eating up” a lot of farmers' profits. Therefore, having direct sales channels and no middlemen taking a cut is the magic weapon for guaranteed profit without loss this year. (End)