By Zhang Lu
The opening of two new rural financial institutions yesterday
gives hope to the large number of low-income Chinese farmers and
small rural businesses that they will enjoy wider access to bank
loans.
China has long been struggling to channel lending to its vast
rural areas, still not adequately served by the existing financial
system. Villages are home to less than one-sixth of all bank
branches, accounting for 15 percent of the country's deposits and
loans in 2006.
Cities get 10 times more loans per person than the countryside,
where over 60 percent of the 1.3 billion population live. And, only
60 percent of the 120 million rural households that need bank loans
are able to access them.
The new policy unveiled in December, which introduced new types
of rural financial institutions like the village bank and the
lending company opened yesterday in Sichuan and three others to be
opened soon, is expected to breathe life into the rural financial
sector.
The pilot scheme planned in six provinces and autonomous regions
Hubei, Jilin, Sichuan, Qinghai, Gansu and Inner Mongolia encourages
individuals, private companies and all financial institutions to
get involved in rural financing.
New rural financial institutions are supposed to bring
competition to the market, supporting the building of "a new
socialist countryside" along with other financial institutions
serving villages.
But to really arouse the interest of commercial financial
institutions and private investors, the government needs to offer
more preferential policies instead of just easing the market entry
restrictions.
It is profits that will drive businesses to rural areas, and it
is generally held that these won't come easy in rural areas, with
high operation costs and bigger management risks.
(China Daily March 2, 2007)