What problems are encountered in advancing the pilot program of rural "two rights" mortgage loan financing?
Column
Luo Jianchao
At present, the mortgage and guarantee issues concerning farmland management rights and farmers' housing property rights in the various pilot counties, cities and districts across the country that are being advanced have attracted widespread attention. In recent years, the rural "two rights" mortgage experiment has gone from pilot testing in selected areas to the national-level issuance of the Guiding Opinions and the Interim Measures. It can be said that an entry point and breakthrough for solving the rural problems of "difficulty in obtaining loans, difficulty in mortgaging, and difficulty in providing guarantees" have already been found. If this problem is solved well, the problems of "difficulty in obtaining loans and high cost of loans" for farmers are expected to be fundamentally resolved.
To track and study the pilot effects in the current national pilot areas for rural "two rights" mortgages, with the support of the Ministry of Education's "Changjiang Scholars and Innovative Research Team Development Program" innovative team project "Research on the Allocation Efficiency of Rural Financial Markets in Western China, Supply and Demand Equilibrium, and Property Rights Mortgage Financing Models," we conducted large-scale field investigations and farmer household questionnaire surveys for four consecutive years in 5 cities (counties, districts), including Yangling and Gaoling in Shaanxi, Pingluo and Tongxin in Ningxia, and Shouguang in Shandong, collecting a large number of valuable cases and data. Through econometric and empirical research, our research so far has mainly produced the following findings:
The first finding is that, in terms of farmers' willingness to borrow and their response to pilot policies, testing through econometric models found that in pilot areas small-scale farmers responded more actively to land management rights mortgage loans than large farmers, which is inconsistent with the current mainstream view. The policy implication of this finding is that if farmland management rights mortgages and guarantees can benefit more low-income and small-scale farmers, then this policy can further summarize experience and be comprehensively rolled out in forming a rural financial system that is replicable, easy to promote, and broadly covering.
The second finding is that, from the operational models of farmland management rights mortgages, we have summarized two models: the first model is government-led, that is, the "top-down" type, in which the government issues some regulatory documents on two rights mortgages, including detailed management measures such as operating procedures, processes, and risk control, while a host bank or rural credit cooperative opens this business, and at the same time a government-level farmland management rights transfer center is established to solve the problems of transfer and realization of the mortgaged assets. At present, most operational models in the pilot areas are of this government-led type.
The other model is called market-led, that is, the "bottom-up" type, represented by Tongxin County in Ningxia. Its specific approach is to establish a land mortgage cooperative or mortgage association at the village level. Farmers join the cooperative or association by contributing shares based on the area of contracted land. If farmers have credit needs, they use the target amount of management rights on their books as collateral. The role of the land mortgage cooperative or association is to provide counter-guarantees to farmers who borrow from credit cooperatives using all the land in the village. From our field investigations in these five pilot areas, no non-performing defaulted loan has yet been found, and it can be said that the results are relatively notable.
We believe that the operational model in pilot areas can be chosen according to local financial ecology and rural credit environment, especially factors such as the governance capacity of village-level committees.
The third finding is that in pilot areas, in order to control the risks of rural "two rights" mortgages, the government has funded the establishment of a guarantee fund to resolve some risks and losses in the mortgage process, but the guarantee funds in each place are relatively small. As for how to reform next, I suggest establishing a rural "two rights" mortgage credit guarantee company on the basis of the guarantee fund to solve the problems of credit risk and risk compensation in the mortgage guarantee process.
The fourth finding mainly involves a very important issue, namely the value assessment of farmland management rights and the development and construction of the rural property rights transfer market. At present, the practice in pilot areas is mainly to determine it by reference to the transfer rents among farmers in similar areas or for the same type of land, with the highest reaching 1200 yuan and the lowest 600 yuan, and then, together with the remaining contract years and other factors, calculating the value of farmland management rights respectively according to a weight of 0.5. This method of determining value is in fact a method of valuing the usufructuary right of farmland management rights, and generally the assessed value is relatively low. Although this is relatively welcomed by financial institutions, it needs improvement for the policy objective of solving the "two difficulties" in farmers' loans. We believe that there is an urgent need to determine a value assessment system for farmland management rights, and suggest that relevant departments determine government-guided prices according to the agricultural regional layout, land location, fertility, and other conditions, which would be somewhat higher than valuation based on rent. At the same time, it is also possible to explore gradually introducing "third-party" assessment institutions in rural areas to solve the credibility problem in the value assessment of the "two rights."
Another issue worthy of attention is the development and construction of the property rights transfer market for farmland management rights. At present, the risks of the "two rights" mortgage pilot are still relatively small, but due to factors such as natural, market, and policy risks in agriculture, the risks of "two rights" mortgages will gradually be exposed as the pilot is rolled out. Banks hope that when defaulting customers appear in rural property rights mortgage loans or when principal and interest cannot be repaid, someone will take over the property rights collateral. This requires a market system in which property rights can be realized. Only through the rural property rights transfer market can the problem of property rights realization that financial institutions worry about be solved.
Finally, regarding the guiding ideology and principles of rural "two rights" mortgages, these have already been stated very clearly in the pilot Guiding Opinions and Interim Measures. Among them, special attention should be paid to the construction of the rural credit system and rural financial infrastructure. This is a major issue in rural finance and also a systematic project. Only when the rural credit system is built well and the credit environment is good can the problems of "difficulty in obtaining loans and high cost of loans" for farmers be truly solved, thereby achieving the expected purpose of the pilot policy, and only then can the pilot be truly smoothly rolled out.
(The author is director of the Rural Finance Research Institute of Northwest A&F University)