Rural families struggle to raise finance, pay debts

Four percent of rural families were found to be insolvent in 2013 and they struggle to get-approval for bank loans, according to a report on China's rural household finance on Sunday.

The average annual income for over 28,000 surveyed rural families from 29 regions was 36,560 yuan ($5,874) last year and the money households owed was 55,113 yuan on average, according to the report co-authored by the Agricultural Bank of China (ABC) and the Southwestern University of Finance and Economics (SUFE).

Only 27.6 percent of rural households managed to get a bank loan in 2013, while the average figure for household loan approval nationwide stands at 40.5 percent. Meanwhile, 9.8 percent of those in need of financial support were rejected by banks and 62.7 percent did not even apply.

Besides bank loans, 43.8 percent of the surveyed families have resorted to private lending and 36.1 percent of them borrowed money from siblings.

"The contrast reveals the inadequate financial service system in China, as people are put off official financial services due to complex application processes or high standards for collateral," said Yin Zhichao, deputy director of the Research and Survey Center for China Household Finance of SUFE.

Yin added that private lending among families is also a result of traditional Chinese culture, which serves as a supplement to bank loans. However, he also warned of the high risks of private lending as many low-income families are borrowing large sums of money with little capacity to pay it back.

Li Zhenjiang, deputy director of ABC, said Sunday the report will pave the way to solve problems facing rural households, such as offering loans to new agricultural businesses and using land as collateral.

Du Xiaoshan, an economist at the Rural Development Institute of the Chinese Academy of Social Sciences, said that low financial service coverage in rural areas and the accountability system inside banks have also thwarted loan applicants. "Some bankers simply refuse to lend money for fear that clients can't repay which will cause them trouble," Du noted.

The report found obvious non-agricultural transformation. Some 78.3 percent of rural household income comes from non-agricultural sectors, while 43.4 percent in rural areas work in non-agricultural production.