Based on my research of CFPA Microfinance, this will be CFPA Microfinance’s third wholesale loan agreement.  The first was with the China Development Bank back in December 2006 for 100 million yuan and the second was a revolving credit facility with Standard Chartered Bank in January 2008 for 20 million yuan.

Such wholesale loan agreement is a win-win for both parties.  CFPA Microfinance gets additional funds to expand its loan capital and ABC meets the three agricultural dimensions policy loan requirement (三农) mandated by the government.  Moreover, ABC doesn’t have to waste its time making microfinance loans on its own, which it has done poorly in the past.  Depending on how much leeway ABC with its auditors on how to classify the loan (whether it is considered to be implicitly government backed), it may only need to be put up minimum capital reserve requirements.

This agreement not only increases CFPA Microfinance’s loan capital, it solidifies the MFI’s lead in China’s microfinance sector.

Standard Chartered Flyer

The hype around Village Banks is finally delivering something real.  Standard Chartered Village Bank in Inner Mongolia made an announcement yesterday that it will offer unsecured credit to farmers.

Established in August 2007 by the CBRC, Village Banks (VB) were seen as the path to bring credit to China’s rural areas.  Like microcredit companies, VBs can only mobilize deposit and make loans within their county of incorporation.  Three foreign banks have established local branches under the VB structure: HSBC, Citigroup, and Standard Chartered.  Of the three, HSBC is the most aggressive with five branches in the rural counties of Hubei, Chongqing, Fujian, Beijing, and Guangdong provinces.  Citi established its branch in Gong’An and Chibi counties in Hubei (areas not served by the HSBC branches).  Standard Chartered opened its branch in Helingeer County in Inner Mongolia.  Up until yesterday, Standard Chartered’s operation was limited to only deposits and remittances.

It is excellent to hear that Standard Chartered is offering loans to farmers without the need for collateral, especially in a poor county. Despite HSBC and Citi’s move into rural lending, they’ve only incorporated in wealthier counties with export-led industries.  One of HSBC’s branches caters mostly to industrial mushroom “farmers” who produce fungi for export.  Standard Chartered’s venture into unsecured lending is a breath of fresh air for rural financial development.  It will be interesting to see what the loan sizes are and how loans are disbursed, collected, and monitored.

(Click on the thumbnail above for the flyer.)