Agricultural Bank of China to Explore New Models of Rural Financial Services

Following on from its initial RMB200 million wholesale loan to CFPA Microfinance a few months ago, the Agricultural Bank Of China(ABC) is finally extending its reach to help more microfinance organizations. CFPA Microfinance and the FPC MFIs under the Chinese Academy of Social Sciences are all pretty safe risks ; while we applaud this opening up on the part of ABC, we hope that other MFIs that have long pioneered the difficult job of extending financial services to the remote rural populations and that are not as directly tied to the state, will also be similarly helped with wholesale financing. (Definition of the word « microfinance » in China is often problematic, and we note that for this kind of loan the author refers to « poverty-alleviation microfinance » to distinguish it from what is being called now microfinance at MCCs and banks, which could mean any sum up to RMB500,000.)

- PlaNet Finance China Executive Director, Gabrielle Harris

The Agricultural Bank of China (ABC) and four poverty alleviation micro-credit organizations held a cooperation agreement signing ceremony in Beijing. Leaders present at the signing ceremony included, Vice-chairman of the NPC Standing Committee, Hua Jianmin, the NPC Standing Committee, Financial and Economic Committee Vice Chairman Wu Xiaoling, the People's Bank Research Bureau, Deputy Inspector Li, Deputy Director Huan Nam of the China Banking Regulatory Commission regulatory, the State Council Poverty Alleviation Office of Planning and Finance Department Director Xu Hui, Vice President Wu Yin of the Chinese Academy of Social Sciences and ABC Communist Party Secretary, Chairman Xiang Junbo.

According to the content of the agreement, ABC will work in partnership with four poverty alleviation micro-credit organizations in Yi County, Hebei Province to provide a fixed amount of wholesale lending which the four micro-credit organizations will then lend to poverty-stricken farmer population, to improve production.
As a large state-owned commercial bank and the main force in the "San Nong" initiative, the ABC has a strong financial strength and a strong sense of social responsibility, a partnership of this nature between large commercial banks in China and micro-credit organizations working in poverty-stricken areas to thoroughly examine rural financial service offerings is a model sets an important example. Cooperation between large banks and small financial organizations integrates operational strengths and commercial operations to addresses the challenge for large banks to meet financial service needs of rural populations and financing challenges of small micro-credit organizations. Thus allowing more households to receive loans, form sustainable long-term social and economic benefits for rural financial reform and provides the innovation and hands-on experience for micro-credit organizations.  

With the rapid development of the rural economy, the advancement of agriculture industrialization, financial needs in rural areas have become very urgent, thus making it difficult for current financial service providers to adapt to the rural economic development. According to the China Banking Regulatory Commission estimates; approximately 120 million farmers have a demand for loans and nearly 30% of rural households are unable to obtain loans from financial institutions due to lack of collateral or guarantor. After the party’s 17 National Congress clearly promoted to "promote rural financial system reform and innovation", the ABC, represented by a group of commercial banks made a number of attempts in the financial sphere, while relevant departments under the impetus promoted the opening of micro-credit organizations and village township banks in various counties. Rural areas and the financial demands of farmers received unprecedented attention, rural finance was rapidly developing.

As the only large commercial bank to serve the “San Nong” initiative needs, serving "San Nong" represents an obligatory social responsibility for the ABC. As a member of the State Council Leading Group for poverty alleviation and development unit, the ABC has a long-term responsibility to shoulder the glorious mission of "offering discount loans to support poverty-stricken areas", the cumulative distribution of the poverty alleviation special loans amounts to 225.861 billion yuan. Prior to the 2008 spin-off of ABC non-performing anti-poverty loans, the agriculture development expanded 2.6 times, reaching a balance of 91.864 billion yuan, of which the balance of subsidized loans was 23.497 billion yuan.