Banks should allow more livestock and other agricultural-related items to be used as collateral, according to a policy opinion issued by the China Banking and Insurance Regulatory Commission (CBIRC).
Currently, banks will typically only accept collateral in the form of real estate, which has made it difficult for smaller farmers to get loans to expand or improve their operations.
One of the reasons that large hog breeding operations were able to gain a significant amount of market share during the heigh of the African swine fever outbreak was that they were able to access financing that wasn’t available to small farmers. This included stock sales, debt issuances, and subsidized loans from state-owned banks.
Small farmers had significant assets in terms of their hog herds but weren’t able to borrow against that in order to expand operations.
In its opinion, CBIRC said that banks should reduce their dependence on loans tied to real estate and develop more financing products for small enterprises and farmers. The Commission said this could include farming equipment, livestock, aquaculture products, and other agriculture-related assets.
The motivation for these changes ties into “rural revitalization”, a major policy initiative of Chinese President Xi to reduce income disparities between rural and urban areas.