China to Fill Gaps in Rural Financial Services in 3 Years

China has pledged to increase the credit supply to the country's vast rural areas, where development has been burdened by chronic capital shortages.

He Fei has more.

In its Number 1 policy document of the year, the government says that it will make more efforts to strengthen financial services including micro-credit loans and insurance services in rural areas.

Tang Renjian, deputy director of the Central Rural Work Leading Group, says that basic banking services would be available in all villages and towns in the next three years.

"At present, nearly 3 thousand villages and towns do not have any financial institutions, and more than 700 of them have no access to financial services."

The low volume of lending has long been a problem in rural areas. Analysts have expressed concerns that most of the savings that rural residents put into financial institutions have been used to finance production and business in much wealthier cities.

Tang Min is an official from the China Development Research Foundation. He says although the government has consistently increased input to rural areas, it couldn't fill up the outflow of rural savings.

"We can't expect that capital would flow to rural areas from cities. What we should do is to ensure that farmer's money keeps circulating in rural lending. As long as we realize the goal, China's rural areas will see a big leap forward in their development."

Most of the rural financial institutions like Rural Credit Cooperative, Postal Savings Bank of China, township banks and small loan-lending companies are commercially driven. They always set limits on rural lending for fear of bad debt and low profits.

Tang Min says those impoverished farmers, who are mostly in need of assistance, cannot get loans from those institutions.

To find a way out, he highlights the importance of developing micro-credit loans. The economist cites the example of Nobel Laureate Muhammad Yunus, who provides loans to those too poor to qualify for traditional bank loans.

"I think for different groups of borrowers and markets, we should have different institutions manage the micro-credit in different ways. Now China is deadly short of micro-credit loaners designed for poverty relief, such as NGOs. These institutions shouldn't follow the path of commercially-driven ones. They should develop their own ways in giving out loans."

Tang Min says there once had been nearly 400 pilot schemes for poverty-relief loans, but the number dropped sharply to dozens, due to the lack of policy support.

"These lenders are not regular institutions, and they don't have authorized licenses for their business. I think we should accelerate the pace of setting up policies to give these non profit-making intuitions more room for development."

Against the backdrop of the credit boom in January, the economist adds that while containing excessive lending this year, the government should bear in mind that the credit supply to rural areas should be encouraged.

He Fei, CRI news.