China looks at India for farm credit models

HONG KONG: As China goes about its endeavour to build a “new socialist countryside” and address the problems that poverty-stricken farmers face in accessing farm credit, it is looking to India’s successful microfinance model for inspiration.

On Saturday, China’s leading University tied up with HSBC to research and devise a microfinance model to serve the country’s farmers, many of whom do not have access to any form of credit. The three-year research project is to be undertaken in the north-western Gansu province and north-central Hebei province with a 10 million yuan (Rs 5.5 crore) scholarship from HSBC.

HSBC Asia-Pacific chairman Vincent Cheng Hoi-chuen is on record as saying that the research would draw on the experience of successful microfinance models in India and the Philippines. “We hope to find some workable business model from it,” he said. Although HSBC is sponsoring the research, it is far more likely that the lines of microcredit  will be opened up largely by rural cooperative banks.

The research area addresses a critical area of concern in China, one that has engaged the attention of top administrators in recent times, particularly in the face of evidence of huge income disparities between rural and urban areas.

The absence of an evolved financial system is considered one of the biggest impediments to rural growth. China has undertaken several other efforts to address the problems of agrarian populations. In December, the government abolished grain tax due to growing unrest in the rural areas.