OREANDA-NEWS. March 11, 2011. Rural finance market is a difficult issue, as banks have always wanted to address it but failed. The rural market enjoys a broad regional space and enormous demand for finance, but its innate disadvantages are also very obvious, such as, its weak guarantee conditions and worse financial environment. It has become a secret trouble to enter the rural market for banks especially large ones, and it is more difficult to develop the rural financial market. In recent years, Bank of China, taking the new model ‘BOC Credit Factory’ as a turning point and product innovation as a basis, vigorously promoted the development of agriculture-related Small and Medium Enterprises (SMEs), reported the press-centre of Bank of China.

Solve Problem by Mechanism Innovation
BOC Credit Factory means a new finance mode specially serving SMEs. The mode is formed by integrated innovation through combining the operation philosophy of foreign SMEs with China’s actual conditions. Since 2008, Bank of China has reproduced the new mode in 27 Level-1 branches in China, realizing the strategic objective of overall arrangement of domestic institutions.

The difficulty of agriculture-related SMEs finance is a systematic problem, which needs analysis and solution through a stable mechanism with a forward vision and developmental view. It is particularly important to build a set of normal system which is suitable for SMEs and can go deep into agriculture-related market. The BOC Credit Factory meets the demand of times.

First, huge market demand provides fertile soil for the sustainable development of this business. In recent years, the disintermediation phenomenon of large enterprises is more serious, and the financial strategy of “large customers make a bank stronger, small ones make it more stable” has become an operation principle for most large banks. If a bank can make a new development space in rural market through innovation business mode, it can lead the transformation in this area and make great achievement successfully.

Second, we can promote the research and development of agriculture-related business through scenario analysis. The scenario analysis which involves in the business in advance is a step exclusive to the new mode. The analysis integrates and implants the dispersive market research in business operation flow, banks can observe enterprises in overall situation. Thus the mode is benefit for market risk prevention, and becomes an engine and guarantee for the bank business development.

Third, the routine, standardized and specialized credit flow is compatible with SMEs’ short, frequent and quick financing demand, which really solves the supply and demand contradiction of financial products. SMEs have always small amount funds, short turnover period and unfixed purposes. Due to the periodicity of agricultural activities and the particularity of agricultural products transactions, banks’ operation is facing bigger difficulty and risk in terms of such SMEs. BOC Credit Factory’s routine, standardized and specialized support plays a role of “assembling the parts into a whole”. The batch product design, in-depth market survey and standard operating process can achieve the purpose of controlling individual risk and meeting special demand, and therefore improving level of services in terms of the system.

Great Achievements on Product Innovation
The development of agricultural SMEs requires keenly seizing opportunities in the agricultural market consistent with the development of modern society, setting up the bulk marketing concept, and diversifying the product system, achieving the outcome of product innovation driving business development, business development driving further product innovation.Product is an effective approach to improve service and efficiency. Good utilization of products enables to reduce credit cost and mitigate risks involved in agricultural business.The hierarchical service concept of customer base and industry cluster allows to manage customers by product, and further market segmentation substantially improves services, thus agricultural enterprises and farmers can enjoy the great achievements of modern finance.

Following the development of rural-urban integration, Bank of China's Suzhou branch launched "Nong Dai Tong" loans under the great opportunity that Suzhou is designated as one of the first pilots of comprehensive reform supporting the development of rural-urban integration in China."Nong Dai Tong" loans are guaranteed by the Suzhou Agriculture Guarantee Co., Ltd., and disbursed by Suzhou branch to qualified rural cooperative economic organizations in villages and enterprises under their control, which are used in construction and maintenance of village cooperative production and public projects, maintenance, upgrade, transformation and decoration of village cooperative property, payment of engineering projects, and other legal purposes."Nong Dai Tong" loans first solve the ownership problem in collateral of cooperative property, and deepen grass-roots rural financial service. With loans disbursing to more than 80 cooperative economic organizations in villages and towns, agriculture, farmers and rural areas are all benefited.

In Shangdong, a RMB 318 million of "Apple Tong Bao" loan from Bank of China was disbursed to support the development of 31 local apple processing and sales enterprises, covering over 400 upstream and downstream enterprises engaged in apple processing, efficiently utilizing 1.6 million tons of local logistics storage capability and 660,000 mu (equal to 440 sq. km) of apple planting area.In Henan, a RMB 12 million of "Lian Bao Tong" loan was provided to support the development of local six households raising dairy cows, bridging the supply from farmers and the demand from enterprises.In Heilongjiang, centralized credit support was provided to local grain production and processing enterprises in a bulk operating mode. By the end of December, 2010, Bank of China has disbursed about RMB 200 million of loans to multiple rice processing SMEs, effectively promoting the development of Heilongjiang’s grain processing industry.

By the end of 2010, Bank of China has launched over ten categories of agricultural loan, such as Cotton Tong Bao, Grain Tong Bao, Apple Tong Bao, Nong Dai Tong, and Lian Bao Tong, covering cotton, grain, apple, nursery stock, rice, corn, fruit nut, peanut and other industry clusters, as well as provided all-around financial support to production, processing and sales of agricultural and sideline products and rural construction by means of personal assets collateral and pledge, joint guarantee, rural cooperative property collateral, etc.

In order to further play the role of large commercial banks in supporting the development of agriculture and rural economy, Bank of China launched "Bank of China?Yi Nong Dai" loans in accordance with the features of rural economy. Considering the specific conditions of industry chain in rural areas, this innovative loan product includes several subproducts, establishing a Bank of China characterized product system covering agriculture, rural areas and farmers in line with the features of rural market."Bank of China?Yi Nong Dai" loan is specially provided to self-employed households engaged in rural industry chain, including crop production, livestock production, forestry, procurement of agricultural products, processing industry, etc., and used to satisfy their capital requirement in operation.There are five lines under the "Bank of China?Yi Nong Dai": traditional crop production, livestock production, forestry, agricultural machinery, and relevant industries involved in agricultural industry chain.This product is very popular among individual customers. By the end of December, 2010, 5194 personal agricultural loans have been disbursed, with the amount totaling RMB 3.278 billion and a balance of RMB 1.905 billion. At present, there is no non-performing loan.

"Agriculture, Rural areas and Farmers" are socially focused issues in China for a long time. Developing agriculture, constructing rural areas and supporting farmers are not only historical tasks, but also emergency issues which should be solved currently. To solve financing of agricultural SMEs is a test to the sense of social responsibility of the public, and especially to the intelligence and innovation capability of financial institutions with banks as their representatives.Bank of China intensifies system innovation, improves financial service level, strengthens cooperation between banks and enterprises, and upgrades internal mechanism, implementing effective practices in financing of SMEs concerning agriculture, rural areas and farmers.By further improving products and services, Bank of China will contribute its efforts to finance agricultural SMEs with SME Credit Factory.