# Presentation: 314272

## Facilitating Access to Finance in Rural Area 

- Facilitating Access to Finance in Rural Area

* *HAN Bin
- Ministry of Finance, PRC

**Notes:**

Good morning, ladies and gentlemen. 

Pleased to be invited to address you the status of China’s financial system and related reforms.

I’am working in the Ministry of Finance, responsible for formulating fiscal and financial policies and regulations for the state-owned commercial banks and asset management corporations, and supervising the performance and financial statements of these financial institutions. Ministry of Finance works closely with the Central Bank and the financial authority on the reform of state-owned financial institutions and financial stability. Representing Ministry of Finance, I’m also a member of the supervisory board of ICBC, the largest bank in China, as well as a member of the supervisory board of Huarong, one of the four AMCs. 

##     Content
Finance and Rural Development in China
Challenges in Rural Finance
Facilitating Financial Access in Rural Area
Proposed Fiscal Policy Measures

- Finance and Rural Development in China
- Challenges in Rural Finance
- Facilitating Financial Access in Rural Area
- Proposed Fiscal Policy Measures

## Finance and Rural Development in China 

**Increasing Credit Funding**
-         Rural Credit: 01-06 CAGR12%, 06 end CNY 4.5 tri.
- Grain and cotton purchase
-      23% / 50% of annual output, no more IOU
- Agricultural development
-      Infrastructure, key projects & agro-enterprises
- Rural household capital needs
-      Lending: 07 end CNY 1 tri., 2.5 times 02
- Poverty alleviation
-      Subsidy: 07 end CNY 7bn = CNY200bn lending

**Expanding Service Coverage**
- Rural financial institutions
-      ABC, ADBC, RCC, Postal Savings, new ones.
- Coverage
-      07 end 126,000+ outlets, 60% household needs

**Promoting Rural Insurance**
- Insuring rural production
-     07 premium CNY 5.18 bn, claims CNY 3bn.
-     Subsidy (budget): 07 CNY 2bn, 08 CNY 6bn.

- Financial Services: Essential to Rural Development

## Challenges in Rural Finance

**Rural Capital Outflow**
- High risk vs. Low profit
-      Natural, market, credit risks, etc.
-      Limited interest margin – high operation costs.

- Financial Market Imperfections Limit Access to Finance

**Insufficient Service Provision**
- Business outlets 1 for 50 villages
- Services limited varieties
- Competition 07 end 90% loans by RCC

**Unsustainable Institutions**
- Poor governance and control     Ownership, management, connected lending.
- NPLs and low profitability

**Imperfect Rural Insurance   **
- Limited coverage about 25%
-      Insurance companies and farmers inactive
- Disaster insurance inadequate

## Facilitating Financial Access in Rural Area

- Facilitate access to finance in rural area through proactive use of fiscal policy measures supporting increase of financial supply and enhancing commercial sustainability.
-      Near-term target: Large commercial finance levered by small fiscal incentives.

- Profit-seeking nature of financial institutions

- Poor credit environment in rural area

- Vs.

**Mismatch of demand for and supply of finance in rural area**

- Government action is necessary to correct market failures.

## Proposed Fiscal Policy Measures 

**Tax exemption for the new-type rural financial institutions**
-       Exempting the three new types of rural financial institutions from business tax and corporate income tax for 5 years.
**Tax reduction for other rural financial institutions**
-       Lowering the rate of business tax to 3% for all other rural financial institutions including commercial banks.
**Bonus for rural lending increase**
-       Awarding financial institutions for rural lending calculated on the base of their annual increase in rural lending.
**Interest subsidy for rural household lending**
**      **Providing interest subsidy for rural household lending enabling financial institutions to increase interest margin.** **
**Premium subsidy and compensation for rural insurance**
-       Expanding coverage to a wider scope of crops and livestock and setting up a lost sharing mechanism for big disasters.** **
**Rural development equity investment fund initiative**
-       Initiating a rural development equity investment fund investing in key rural projects, enterprises, financial institutions.

## HAN Bin, currently a Director of Finance Department of Ministry of Finance, PRC, working in such areas as financial supervision of state-owned financial institutions, rural finance, government external debt management, etc., holding a Master’s Degree of Economics from University of International Business & Economics, China, and an MBA from Cranfield School of Management, UK.   

- Ministry of Finance, PRC, does not guarantee the accuracy of the data included in this  presentation. The findings, interpretations, and conclusions expressed in this presentation do not necessarily reflect the official views of Ministry of Finance, PRC. This presentation does not constitute a commitment by Ministry of Finance, PRC, to formulate or promulgate any policy or regulation or to take any policy measure or to provide any other services.

- HAN Bin, currently a Director of Finance Department of Ministry of Finance, PRC, working in such areas as financial supervision of state-owned financial institutions, rural finance, government external debt management, etc., holding a Master’s Degree of Economics from University of International Business & Economics, China, and an MBA from Cranfield School of Management, UK.