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Farmers' financial needs

(China Daily)
Updated: 2008-09-23 14:46

The first rural financial service report issued last week by the People's Bank of China shed much-needed light on the overall development of and challenges to rural financial institutions.

By calling for a further upgrading of the nation's rural financial service system, the central bank's report highlighted the great importance of simpler and low-cost financial services in terms of boosting rural economic growth and improving farmers' living standards.

Domestic financial institutions and related regulators should respond quickly to meet farmers' growing demand for better financial services.

According to the report, despite enhanced efforts to develop rural finance in recent years, highly inadequately such services remains serious in rural areas.

While farmers account for about two-thirds of the population, rural deposits and lending both were less than a quarter of the total volume nationwide.

To make matters worse, 2,868 villages and towns, 7 percent of the total, were lacking financial outlets by the end of last year.

As a result, difficulties in obtaining loans have deprived many farmers of opportunities to expand production or start new businesses with the assistance of modern financial services.

The dire reality of rural financial services has a lot to do with both major financial institutions' inclination to concentrate on urban business and regulators' procrastination when it comes to speeding up rural financial reforms.

After market-oriented reforms to transform themselves into commercial lenders, many cost-conscious Chinese banks have retreated from the rural financial market.

And though the government has been progressing with establishing new rural financial institutions with banking functions and encouraging capital from various sources to invest in rural financial institutions, supportive measures are coming too slowly.

However, the country's widening development gap between rural and urban areas requires prompt policy support to upgrade rural financial services.

The central bank's report offered some practical suggestions such as simplifying procedures for major financial services, including deposits, loans, remittances, insurance, futures and stocks, in a bid to reduce business costs and make services more convenient.

But what is more important is that the country needs to explore ways to develop new types of financial organizations suitable to rural areas and intensify efforts to make innovations in financial products and services available in rural areas.

To build a new countryside, an overhaul of the rural financial service system ought to come as soon as possible.