31 October 2012

3 minute read

Asia

To make it easier for such people to borrow, Wenzhou city government has decided to allow poultry and livestock to be offered as security in loan deals.

The policy's goal is to help breeders who now face obstacles to obtaining the loans they need to run and expand their farms.

"This is a way to assist farmers and will provide financial support to help ensure their farms operate more efficiently and that they can make greater profits from their businesses," said Huang Fanglei, director of the Wenzhou agriculture bureau's rural financial services department.

Huang said the policy will help farmers who lacked collateral under former rules obtain loans from lending agencies or rural credit cooperatives.

Because the land that breeders have their farms on is owned by the government, they cannot use it as a pledge of security in a loan deal.

In early October, the city government approved a plan allowing breeders to offer a specified number of poultry and livestock animals such as pigs and cows as collateral.

In return, they can receive loans that are worth up to as much as 80 per cent of the assessed value of the animals they offer as security.

The conditions the animals were raised in, their likely market value and how the potential borrower plans to make use of the money he seeks will all affect how long the loans last.

"One of the biggest difficulties for farmers is that they don't have enough cash to expand their farms and make greater profits," said Xiang Yanrun, director of the Wenzhou animal husbandry bureau's animal husbandry department. "That will soon change under this plan."

Xiang said individual farmers who have nothing more to offer as collateral than cows and pigs are still going to find it hard to obtain loans from banks. Rather than them, the new policy will mostly benefit those who form groups to apply for loans from rural cooperatives and mutual-aid fund associations.

This is not the first time that animals have been allowed to be used as security in loan transactions in China.

In August 2010, the government in Zaozhuang, Shandong province, adopted a policy that allowed quality pigs and cows to be put up as collateral, helping 70 percent of local farmers with acknowledged financial troubles to obtain loans. Several Wenzhou breeding farmers meanwhile said they were delighted that many of their difficulties would soon become a thing of the past.

"Using animals as security is a practice that we farm owners have traditionally employed when applying for loans, although it seems to date to ancient times, when people were still trading using the barter system," said Lin Xianzhong, president of Wenzhou Zhanhong Farming Co Ltd and owner of the biggest pig farm in the region.

Lin used to find it difficult to obtain bank loans and had instead turned to mutual-aid funds association for financing.

Lin has worked with 110 pig farms to start a mutual-aid fund association that offers financial support to smaller farms.

"We have already allowed our members to use pigs as collateral in loans," Lin said. "Even without the value of these pigs being assessed, we know a lot about their quality."

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