New creative rural credit system feeds farmers' businesses

Yu Shunyuan used to worry about not having enough money to buy fodder. But now, a credit system built by rural credit cooperatives or RCCs is feeding his business.

More than 10 years ago, Yu started a pig farm in Lijiagou village in Northwest China's Gansu province. He raised more than 100 pigs and was always in dire need of cash when it came to buying piglets and fodder, as well as vaccinations.

"Borrowing money was killing me," Yu said. "I didn't have anything to pledge as collateral, and loans from friends sometimes hurt our relationship." Things changed after the village, in Gaolan county, was named a "Credit Village" by the county's RCC, thanks to the locals' good credit records.

Earlier last year, a work group of local RCC staff paid a visit to Yu. After confirming basic information about his family members, his assets, income and expenses, and debt, they assessed Yu as a "Platinum Credit Farmer", meaning he could take out a loan up to 100,000 yuan ($14,535) requiring nothing but his credit score.

For a long time, it has been nearly impossible for local farmers like Yu to expand their businesses due to the lack of collateral for financing. Therefore, overcoming poverty became even harder for people in under-developed areas like Lijiagou village, once an impoverished village.

But now, all Yu needs to do is click on the application of the local RCC on his smartphone to apply for the loan, and the money will be sent to his account in a short time.

There is a "double insurance" assessment system, according to Liu Guojun, with Gaolan's RCC. Besides business conditions and income, the rating system also includes the borrower's relations with neighbors and word of mouth about the borrower's character.

"From Normal to Platinum, we divide our customers into five ranks," Liu said.

However, once a non-performing loan ratio goes beyond 3 percent in the village, the "Credit Village" title will be taken down, and farmers will no longer be able to borrow money.

"The credit of the entire village is our biggest collateral," said Yang Guoyuan, a local official. "So our villagers never delay their repayments."

Lijiagou village used to be mired in grinding poverty. In recent years, fruits, raising domestic animals, and transportation powered the local economy. But farmers were still strapped for cash.

"They have suffered a lot due to the lack of capital, so now they try their best to protect the 'Credit Village' title," Yang said.

So far, 86 households in the village have passed the assessment, and the microcredit system has granted 6.46 million yuan to the villagers, with more than 3 million yuan already used.

According to the county government, by the end of October, five villages in Gaolan, including Lijiagou, have been named as a "Credit Village", and about 23,000 rural households have passed the assessment. Total credit loans have exceeded 680 million yuan.

China still has about 30 million impoverished people who earn less than 2,300 yuan each year and aims to lift all of them out of poverty by 2020. As the country's financial institutions implement inclusive finance to help win the battle against poverty in rural areas, such credit systems have extended to many areas in China.

In the county of Weixian in Hebei province, for example, 20 such "Credit Villages" have been established. In the southern Guangxi Zhuang autonomous region, seven "Credit Townships" have received about 450 million yuan in credit loans.