Targeted poverty alleviation and bank models

Model Four: Bank + Industry + Poor Household

From 2011 to 2015, Pingyu County had lifted 109,300 people out of poverty by cultivating industries.

Modern Ecological Planting is a key industry in Pingyu County. In the first half of 2016, financial institutions in the county granted 19.9 million yuan of loans for businesses in the planting industry. For example, Aoxiang Ecological Agriculture Planting Technology Co. Ltd in Pingyu County received a loan of 1.2 million yuan. It has used the loan to sign contracts with 110 poor households, guaranteeing each an annual dividend of no less than 1,000 yuan. So far the company’s annual sales income has reached 2 million yuan, meaning that the 50 poor farmers working for Aoxiang will be able to each receive an annual salary of 6,000 to 10,000 yuan. The company is on track to create 100 jobs a year and lift these people out of poverty in Pingyu County.

Model Five: Bank + Credit + Poor Household

The People’s Bank of China has designated Shangcai County as the pilot area to test out the rural credit system. In 2016, it has launched an internet-based rural credit information management system in the county. By the end of June this year, the system has included information of 18,460 households, 134 family farms, and 3,770 professional cooperatives. Since 2015, a total of 123 credited poor households have received loans of 8.69 million yuan from the bank, as well as 420,000 yuan of discounted loans from the county poverty alleviation office. The pilot program has granted 26.8 million yuan of loans to four rural cooperatives and 11.03 million yuan to 44 family farms. A number of local agricultural brands have since been established and the poverty alleviation result has been remarkable.

Xinran Breeding Cooperative in Shangcai County is one of the beneficiaries of the credit program. It’s one of the most experienced new agricultural cooperatives established in the earlier years and a key subject supported by agricultural financial institutions in Shangcai County. In January 2015, the cooperative was granted a loan of 10 million yuan. By the end of June 2016, the cooperative’s total assets have been valued at 28.17 million yuan. Its sales income and net profits have respectively reached 7.55 million yuan and 1.03 yuan, raising over 3,000 cattle and 1,700 cows a year. The cooperative has created 32 jobs and increased poor farmers’ labor income by 800,000 yuan and cattle farmers’ net profit by 7.3 million yuan.

In this case, the county has revitalized financial activities by collecting information from farmers, family farms and rural cooperatives and connecting them with financial institutions. The credit system has helped poor households secure funds otherwise difficult to obtain.

The five models above developed by the People’s Bank of China’s Zhumadian branch office have shown ways for banks to participate in targeted poverty alleviation. Banks have become more willing to lend while the newly injected capital has further motivated the poor to change their lives for the better.

It’s crucial for banks to take up their corporate social responsibility. For State-owned financial enterprises it’s a basic requirement. However, due to different geographic locations, social environments, local economic levels and the institutions’ own ability, the degree of their responsibilities may vary. As for now, China is experiencing an economic downturn and many enterprises are in deep water. They need more resources to resolve difficulties. Financial institutions in China must look at more than their target numbers and understand that their sustainable development too relies on a healthy overall economy, and their financial assistance is key to revitalizing enterprises in need.

Targeted poverty alleviation aims to use funds efficiently and precisely. As professional financial institutions, banks are equipped with the best skills and knowledge to recognize potential value and the industry advantages of a loan applicant’s business. With their rich experience they can also help the poor to choose a sustainable business to engage in and provide them with initial capital. The involvement of banks will in turn encourage the participation of more government and social capital, realizing a continuous growth of funds, which will ultimately lift the poor out of poverty with precision.

China’s poverty reduction journey has gradually grown from offering relief to offering development. Poverty relief in the form of allocated foods and funds provides only a temporary solution whereas poverty alleviation through development fundamentally changes the poor population’s living environments and is sustainable. We must engage the poor with the market economy and help lift them out of poverty by developing businesses and industries.