Agricultural Bank Of China Farmer Credit Research

The State Council requires the shareholding reform of Agricultural Bank of China to face the agriculture-related problem which is regarded as a first principle, and operate commercially. Thus, it is necessary to analyze how Agricultural Bank of China provides financial services for farmers.It is a world-wide problem for large commercial banks to carry out the micro-credit of farmers which began to be spread and transplanted in 1990s. The micro-credit of farmers had a success in some developing countries and realized the combination of common wealth and profitable goals. This paper introduces the advanced experience and thinking patterns of the ICICI Bank in carrying out agricultural financial services. It illustrates the series of reform measures in the agricultural financial system taken by our government to adapt to different needs of agricultural economic development, and the relationship of agricultural finance and economy. It also analyzes the significance and necessity in carrying out the micro-credit of farmers by Agricultural Bank of China and the features, current situation and problems of it by internal and external financial institutions. This paper proposes that the quota of farmers' micro-credit in Agricultural Bank of China should be determined according to the local economic environment the actual needs of farmers. And the term of loans should be determined by the cash flow and properly extended for the effects of irresistible natural disasters. The lending rates have to cover the costs, guarantee small profits and realize the economies of scale. When it carries out the micro-credit of farmers, the ABC has to classify different customers and actively support farmers with marketing competitiveness, leading enterprises with strong impetus and the farmers above subsistence near the branches of ABC. Besides, the ABC needs to have a clear market orientation. The key of carrying out the micro-credit of farmers is modes. Compared with other agricultural banks, the ABC has different business patterns, developing orientations, advantages and disadvantages in different areas. Therefore, carrying out the micro-credit of farmers should follow the principle of comparative advantage and in line with local conditions to implement the strategy of differentiation. This paper puts forward four modes of development according to the developing difference of Eastern, Central and Western China. The branches distributing in the highly developed areas along the sea coast have abundant sources of funding, which can draw on the indirect pattern of Citibank. The branches mainly use the agency and wholesale funding model to take an indirect pattern in accordance with the business principles to provide wholesale funds for credit cooperatives or micro-credit companies and form the cooperation framework in market segments. In the central parts of China, based on the contracts with the farmers, the branches can take a united pattern to provide loans and form a network of companies and farmers with contracts including agricultural products processing enterprises, agricultural marketing enterprises, commercial banks and other organizations. This pattern can closely link the upstream and downstream industries to effectively prevent the risks of credit and realize the win-win of banks, farmers and enterprises. The western undeveloped areas can form a cluster of customers with something in common. The ABC takes the advantages of networks and personnel strengths to manage the whole customers as a unity in the cluster and directly carry out the business of micro-credit. No matter which pattern the branches follow, they should use the platform of government and relaxed social environment to resolve the problem of asymmetric information.The ABC must get rid of traditional thinking patterns and management to combine the electronic means of payment with the financial needs of farmers. And it must do well in the reform of management system, the development of modern company, suitable financial services and flexible products designs. It also has to establish a suitable arrangement and design a proper process with customers of agricultural loans. Moreover, the ABC has to emphasize on the abilities of service, risk control and sustainable development, and establish a scientific test system to accurately calculate the costs and profits and reflect the situation of business development of farmers.Risk control is the premise of sustainable and healthy development of micro-credit loans. Agricultural production is easily affected by climatic, geographical and seasonal factors, and different agricultural products have different characteristics in production, processing and circulation. The overall performances of farmers to credit risk are diversification, exposure to high-frequent risk, difficulties of standardizing risk information and risk control of natural disaster. So it is from the perspective of policy risk, business risk, operation risk and credit risk to strengthen the development of the access mechanism, cultivate the customer awareness of risk transfer and make the education of finance universal. Besides, it also enhance the post-loan management, establish a system of clear responsibilities and a mechanism of risk control to find out and deal with risks in time and realize the safety and profitability of business development.All in all, it is not only the social responsibility but also the need to future development for the ABC to carry out the micro-credit of farmers. If only the bank scientifically designs its products, chooses its target customers, determines the developing pattern in line with conditions, strengthens the management and strictly controls risks, it can achieve a profitable return.