Business / Markets

Grassroot Party chiefs reversing rural credit vacuum

(Xinhua) Updated: 2014-07-01 17:11

BEIJING - At 39, Xujiahe Village Party chief Xu Biwei has found himself in a job that does not pay. He's a loan facilitator.

But apparently he is good at what he does. In 2013 the village secured more than 4.6 million yuan (about $740,160), a three-fold increase from the year before, in loans thanks to Xu.

The figure is impressive, especially taking into account the huge financial vacuum in rural China, where banks are few despite a large population that need funds for their crops and families.

China's collective land-ownership system is a major constraint on farm borrowing and investment. Farmland cannot be bought or sold, leaving farmers with little collateral to secure long-term loans.

Banks and credit cooperatives, meanwhile, also complain about higher risks of default in rural areas, due to a lack of personnel to review applicants' portfolios.

That is where Xu comes in.

In a way, the Communist Party of China (CPC) village chief in central China's Hubei province works like an independent international rating agency. He assigns credit ratings of fellow villagers, assessing their capabilities to pay back debts and the likelihood of default.

"Nobody else knows my fellow villagers better than me and my colleagues, and the credit cooperatives trust us as well," said Xu.

Villagers looking for loans come to the village committee and the grassroot party committee, which will vouch for the villagers they deem fit, and negotiate with credit cooperatives the type of loans they can receive, he said.

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