Poor households in Hunan benefit from microcredit

One major barrier preventing poor households from developing production activities is lack of funding, and they have nothing to mortgage to secure loans. Now this barrier has been overcome in Hunan Province.

Staff at the provincial poverty alleviation and development office said that Hunan has set up a credit rating system for registered poor households. The new system has replaced eight indices revolving around family assets with three indices on creditworthiness, labor force and family income. These divide the poor into four categories, making sure more than 85 percent of them can obtain a microcredit ranging from 10,000 yuan (U.S. $1,453) to 50,000 yuan (U.S. $7,267). Impoverished households can obtain mortgage-free microcredits as long as they pass the credit evaluation. Loans are based on benchmark interest rates with interest subsidies shouldered by the government budget.

Microcredit issued in Hunan Province increased by 9.35 billion yuan (U.S. $1.36 billion) in 2016, benefiting 230,000 poor households.

Long Xianlan is a single man in Shibadong Village of Huayuan County. He obtained a microcredit of 50,000 yuan (U.S. $7,267) last year. He described this “huge amount of money” as 15 times the value of his total assets. He invested the loan in a bee-keeping business and earned 30,000 yuan (U.S. $4,360) that same year. This not only helped him get rid of poverty but also helped him find a partner.

But none of this can be achieved without risk. In order to guard against this, Hunan has set up microcredit risk compensation fund of no less than 3 million yuan (U.S. $436,046) in each county.

The provincial government has proposed another 6 billion yuan (U.S. $872 million) for microcredit this year so that more poverty alleviation projects can get access to targeted financial assistance.