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Banks innovate finance-based poverty alleviation methods by Liu Yizhou,June 23, 2020 Adjust font size:

Financial institutions engaged in banking have implemented various measures to help fight against poverty, such as increasing their resource preferences, creating various innovative financial products and services, strengthening their capacities for finance-based poverty alleviation, and improving the availability of financial services in impoverished areas with the help of financial technology.

Enhancing the effectiveness of finance-based poverty reduction

Xihaigu prefecture in NingxiaHui autonomous region is one of China’s most impoverished locales. In 1972, it was classified as “one of the least suitable areas for human habitation in the world” by the United Nations. Crop cultivation is difficult as a result of the dry climate and barren mountains in the region. Families living in places such as Caichuan village tended to grow grain and raise one or two livestock animals on fractions of a hectare of land until recently. These kinds of endeavors generated low output value and were often their only source of income.

The Postal Savings Bank of China (PSBC) has been providing Caichuan with support for about 12 years now, which has led to great changes in the village. PSBC’s Ningxia Office conducted research in the area and decided to conduct a pilot credit program in 2008 in order to help Caichuan’s citizens address the lack of capital, industry, technology, and collateral in the village. A total of 170,000 yuan(US$23,698) was loaned to 14 households that had achieved a certain level of animal husbandry operations. A system in which any three households serve as guarantors for the group, including those of village officials and farming experts, was implemented to address a general lack of collateral.

Improved access to finance made it possible for Caichuan to emerge from poverty at the end of 2016. PSBC’s Ningxia Office had extended small loans worth a total of 124 million yuan (US$17.29 million) to its residents as of the end of January 2020.

Caichuan’s story is one of many examples of finance-based poverty alleviation. In recent years,China’s banks have been increasing targeted poverty reduction efforts related to “agriculture,farmers, andrural areas” and optimizing financial products developed for poverty alleviation purposes in order to ensure that financial services reach the“last kilometer.”

Some examples of finance-based poverty relief efforts are as follows:

China Construction Bank (CCB) designed aseries of targeted poverty reduction programs, such as the “Beyond 2020” plan, in order to make a comprehensive finance-based poverty eradication system available. It also explored a sustainable, endogenous method of poverty alleviation that incorporates e-commerce, credit innovation, expansion of its service network, public interest, and resource accumulation.

China Zheshang Bank (CZBank) has established secondary branches in more areas with impoverished counties, such as Xianyang city of Shaanxi province, Liangshan Yi autonomous prefecture of Sichuan province, and Tianshui city of Gansu province, and increased support for key poverty alleviation projects.

Yunnan Office of the Agricultural Bank of China (ABC) has launched nearly 20 new products in succession, such as its “Pu'er loan,” “sugar cane farm loan,” “rural revitalization loan,” “photovoltaic loan,” and “relocation loan,” in order to help impoverished counties’ leading and characteristic industries develop and expand, and meet the needs of impoverished farmers and enterprises in a precise manner.

The power of financial technology

Many banks have explored ways to reduce poverty via consumption by helping specialty products from impoverished areas reach broader markets. Financial technology plays an importantrole in the undertaking.

CCB’s Beijing Office, for example, has launched a poverty reduction store based on its existing Shanrong business platform ( that features consumer products from other areas for its Beijing customers. The system involves “CCB + the Shanrong platform + local governments + local leading companies + impoverished households + consumers.” Customers can shop and pay online and receive convenient deliveries to their homes. The store incorporates 11 featured retail establishments located in or associated with Lhasa city of Tibet autonomous region, Hotan city of Xinjiang autonomous region, the 14th division of the Xinjiang Production and Construction Corps, Yushu Tibetan autonomous prefecture of Qinghai province, and other areas and organizations. They offer a total of 900 products that are made by 13 leading companies and help to reduce poverty.

China Everbright Bank (CEB) has developed and incorporated a cloud payments platform,an e-commerce platform, intelligent equipment, and other innovations into its current poverty alleviation pursuits. The cloud payments platform was granted thequalification to work with the Ministry of Finance in building an official online marketing platform for government procurement of poverty alleviation products. It  provides multifunctional support for the online marketing platform including B2B online payment, capital settlement, order management, merchant management. CEB’s owne-commerce platform ( has implemented the“three exemptions and one integration” preferential policy for products made in poverty-stricken areas, which means that there are no development fees, no access fees, no diversion fees, and that cooperative marketing occurs. It promotes products produced in poverty-stricken areas by obtaining chair person endorsements, engaging in WeChat marketing, reaching sales agreements with companies that buy items for their employees, and other methods. Approximately 264,000 poverty eradication products were being sold on the platform and 27.6 millionyuan (US$3.85 million) of total salesvalue had been achieved as of the end of October 2019.

Financial technology can also be used to help control risk associated with finance-based poverty alleviation. Ye Haijing, general manager of CZBank’s Inclusive Finance Department, believes that this kind of poverty reduction is a “hematopoietic” cycle. As it is often costly and risky to provide poverty eradication credit, he said,it is necessary to carefully analyze the feasibility of potential projects, conform to the states of actual industries and scenarios, meet reasonable quotas, and take similar measures in order to generate cash flow andcontrol risk via good industrial operation in order to make poverty alleviation loans available and ensure that they are utilized well and repaid in order to achieve sustainable poverty alleviation finance.

“These ideas are in the same vein as what is required to serve small businesses and micro-enterprises well,” Ye continued. He stated that CZBank has implemented specialized operations, developing a relatively independent organizational system for small businesses; formulating management methods that are significantly different from those for medium-sized and large companies; and dividing customer positioning, credit systems, characteristic products, internal processes, risk control requirements, personnel teams,and other aspects of the undertakings into various categories and local systems in view of the characteristics and financial needs of small businesses and micro-enterprises. He feels that it is important to implement management systems that are systematic,dynamic, and standardized in order to limit credit and operational risks. Ye also explained that a big data risk management and early warning platform has been created to solve problems that cannot be easily addressed offline, and that AI-powered post-loan management and other processes and technologies transform lending from being “controlled by people” to being “controlled by machines,” which makes risk control more efficient and intelligent.

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