Grassroot Party chiefs reversing rural credit vacuum

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.

The practice has helped fast-track the loan application process.

One of Xu's "clients" Xu Qinghua (the two Xus are not related), a pig breeder in Xujiahe Village, obtained a 200,000 yuan loan last year. The whole process took only two days, whereas previously the application could drag on for months and the maximum loan was only 50,000 yuan.

According to Zhou Weidong, head of the rural commercial bank in Hong'an County, not one debtor has defaulted on interest payments since the program was launched in 2013.

"Grassroot Party committees are indispensable in helping improve rural financial services," said Xu Biwei.

Xujiahe is not an isolated case, as other villages are helping farmers get their hands on vital access to loans.

Qin Hanfeng, deputy head of Hubei's banking regulatory authority, said by the end of March, more than 3,000 grassroot Party organizations in the province had helped secure 1.8 billion yuan in loans for over 7,000 Chinese farmers. Also, application time had been cut by half.

Xie Haibin, deputy head of the CPC's organization department in Hong'an County, said interactions between villagers and village officials have improved with the loan facilitation program.

Xu Biwei echoed this. "In the old days, we really had trouble in convincing Party members and representatives of villagers to come together.But now, all we need to do is to tell them to come."