Press release number: IFAD 22/04

Shanghai , People's Republic of China , 27 May 2004 - More than 100 000 rural poor households in two provinces of China will have better access to savings and loans through a pilot programme to reform the country's rural credit cooperatives. The reforms will help gear financial services to the needs of the poor, especially women.

The USD 21.3 million programme will be financed largely by a USD 14.7 million loan from the International Fund for Agricultural Development (IFAD). A further USD 6.1 million will be contributed by rural credit cooperatives and USD 409 000 by the Government of China. The loan agreement was signed today by Zhao Xiaoyu, Director General, International Department, Ministry of Finance, People's Republic of China, and Erik Martens Officer-in-Charge, Asia and the Pacific Division and Country Programme Manager for China, IFAD at the end of the two-day Conference on Scaling Up Poverty Reduction.

Annual incomes of rural households in the targeted provinces of Chongqing and Shaanxi range from USD 50 to USD 180 - less than a quarter of the country's per capita average. One of the major obstacles to eradicating poverty is the difficulty rural people have in managing their limited assets and in gaining access to loans that they could use to set up a small business to generate income.

''Even the poorest people have some income,'' says Erik Martens, IFAD's Country Programme Manager for China . ''Many poor farmers migrate seasonally. They could transfer the money earned back home and, against those funds, could take out a loan to purchase livestock or set up a small business to process agricultural products.''

For many poor people in these provinces, rural credit cooperatives (RCCs) are the only source of loans and savings services. Although there are many RCCs in remote rural areas, until now they have provided assistance to larger enterprises. Reforms will encourage RCCs to offer poor farmers microcredit - small amounts of money that can be borrowed against little income or collateral.

In the past, RCCs generally gave loans to state-owned enterprises at the township and village level. RCCs will now be trained to assess the financial viability of requests for loans from poor farmers. More flexible lending rates will be developed, tied closely to market forces.

Rural women in particular will benefit from the programme. A ''women's window'' will be established as a way for women to take out loans in their own names. Literacy classes for women will help them become more confident borrowers, and women's groups will assist villagers in understanding procedures and filling out applications. Past experience has shown that women tend to be better borrowers than men and are more likely to repay loans.

Training and capacity-building will also be part of the programme. Employees of RCCs will learn to streamline business operations through computerized management tools. Farmers will learn improved agricultural production techniques and will become eligible for a loan when they have a certificate of training completed.

In introducing improved practices in rural finance, IFAD will work with the Government to refine its national policy reform in this sector. Successful reforms will then be applied nationally.

With this loan, IFAD will have financed 18 programmes and projects in China , totalling approximately USD 450 million.

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IFAD is a specialized agency of the United Nations dedicated to combating rural poverty in the most disadvantaged regions of the world. Since 1978, IFAD has invested USD 8.1 billion in 653 rural development projects and programmes in 115 countries and territories. Through these projects and programmes, about 250 million rural people have been supported in their efforts to overcome poverty .