Farmers Eager for More Efficient Financing Channels

By staff reporter LIU YI

“The Chinese government will improve the banking credit structure to ensure greater access of more areas and effectively alleviate the difficulties that farmers and small businesses have in obtaining financing,” pledged Premier Wen Jiabao when delivering the latest government work report at the Third Session of the 11th National People’s Congress Friday morning, March 5.

The negative effects of the global financial crisis on the Chinese export-oriented industry have caused hundreds of thousands of migrant workers to look to returning to the countryside to set up their own small businesses. But the shortage of available funds for start-ups has been the largest hurdle.

Malang is a small mountainous village in Pingba County of the southwestern province of Guizhou. Of its 1000 villagers, around 30 percent, primarily the younger adults, have been working outside the area in the more industrial coastal cities. Having mastered skills in fine technologies, many have decided to try their hand at starting their own businesses. However the lack of capital is an obstacle for those starting from scratch.

In recent years, the central as well as local governments have implemented a series of preferential financial policies in the countryside. In Yunnan Province, for example, farmers can apply for small loans up to RMB 50,000 if they choose to set up a venture independently or with partners.

The financial institution system in China has traditionally catered to the cities, industry and the commercial sector. Many financial institutions regard loans to farmers or migrant works as high risk and costly, leaving funds to flow to the urban areas. Even the two key institutions, the Rural Commercial Bank and Rural Credit Cooperatives, set up specifically for farmers, do not have a wide enough reach to cover the vast Chinese countryside. Many smaller towns have no access to financial lending institutions at all.

Another situation is that the current lending cycles do not fully coincide with the farmers’ seasonal needs. The financial institutions for the most part issue loans after the Spring Festival, which usually falls between late January and the middle of February. Farmers are required to pay off these loans at the end of year. But for many farmers, for example those running fish ponds, who sell of their stocks around the Spring Festival, it is impossible for them to have sufficient funds for reimbursement at the required period. Some have to rely on additional loans from relatives to pay off the bank loans.

Liu Qiaoying, Party secretary of Malang, is trying to help her fellow villagers to find a solution to the issue. As the only grass-root farmer deputy of Guizhou Province to the Third Session of the 11th NPC, she has prepared related materials and is to submit her proposals during the session. She believes that the government should put forward more measures to aid farmers in obtaining loans, so that they may fulfill their dreams of establishing their own businesses.