China’s Baoshang Bank failure has silver lining in the form of greater focus on rural lending
- Baoshang Bank, which is part of Xiao Jianhua’s Tomorrow Group, was taken over by the government in May due to ‘severe credit risks’
- Based in Inner Mongolia’s Baotou city, the bank aggressively expanded its lending to rural communities, which are now seeing more lending options open up
The midsummer heat had sent the farmers from the village of Wujia Gedu back to their single-storey flat-roof houses before noon, while outside, endless fields of corn swayed gently in a lunchtime breeze.
Few vehicles passed on the narrow road between the green waves of corn, apart from a handful of buses linking the village with the town centre of Dalad Banner, a county-level region more than 100km from the county seat of Ordos, Inner Mongolia. Hardly anybody, however, got on or off at the station of the sparsely populated rural hamlet over 600km west of Beijing.
Around a year and a half ago, several employees from Baoshang Bank, located in the city of Baotao around 67km away, came to this remote corner and convinced several villagers to take out loans. Once the paperwork was signed, they were never seen again.
At the time, Du Erxi, who grows corn on a little more 3 hectares (8 acres) of land, applied for and was granted a 500,000 yuan (US$73,000), one-year loan by Baoshang.
“That loan was very important to me, without it, I would not have had enough money to farm,” Du said.
The loan, though, was expensive, carrying an annual interest rate of over 8 per cent, but Du had no choice. He used most of the money to purchase tools and fertiliser, which allowed him to harvest a good crop last year.