"Spring used to be hard for my family. I had to borrow money from relatives to pay for both school for my children and tools and pesticide for my farm," Uygur farmer Sawut said.

"But this spring, I got a 10,000 yuan loan from the Standard Chartered Bank, which will pay for tools and pesticide. Farmers really need such small loans." The loan is equivalent to about US$1,470.

China's rural market attracts foreign, domestic banks [CFP]

Sawut is one of 600 farmers in Awati County in Xinjiang Uygur Autonomous Region who have gotten loans from a micro-finance program launched by United Kingdom-based Standard Chartered Bank and Hong Kong-based Esquel in the county in December, 2007.

Esquel makes cotton t-shirts, and it buys some of the cotton for its factories from farms in Awati.

The program provides small loans, up to 15,000 yuan, to cotton farmers, without asking for collateral or guarantees. It has also offered training to help farmers control their budgets and improve productivity.

Interest on loans under this program last year averaged 9.9 percent, but that rate fell to 8 percent this year. The current one-year benchmark loan rate, as set by the People's Bank of China (PBC), is 5.31 percent.

Programs like this help fill a huge financial vacuum in rural China, where banks are few despite a population of about 800 million farmers who need funding for their crops and families. The inadequate financial infrastructure held back the development of the rural economy and farmers' living standards.

Yin Jianfeng, a researcher with the Chinese Academy of Social Sciences (CASS), a government think tank, said the rural financial market was an untouched territory, unlike cities where Chinese and foreign banks have battled for market share.

As of the end of 2007, loans from financial institutions in counties or villages stood at 5.72 trillion yuan, accounting for 22 percent of total loans from banking institutions nationwide.

Chinese banks have shown little interest in poor rural areas, where they consider lending to be risky, he added. Farmers, with few assets other than agricultural tools and livestock, have largely been unable to secure bank loans.

Another CASS expert, Li Chenggui, who studies the rural economy, said the bottleneck was that it was still illegal for farmers to use farmland as collateral for loans. Under Chinese law, farmland is collectively owned and can only be used for farming.

In relatively developed eastern regions, farmers can use large farm vehicles like tractors and other equipment as collateral, Li said, but it was impossible for farmers in the poor western regions to do that. They could only borrow from relatives or friends.

These households also have fewer financial resources to begin with. The average annual per capita income of rural household stood at 4,140 yuan, compared with 13,786 yuan in urban areas, as of the end of 2007. The per capita figure for households in remote western areas was only 2,908 yuan.