Better lending products seen in tea leaves

A risk-sharing mechanism has also been established among several parties to effectively alleviate credit risks in GI trademark pledge financing.

The Quanzhou Administration for Market Regulation and the Quanzhou branch of Fujian Rural Credit Union have jointly issued a notice on the pilot project of risk compensation for GI trademark pledge financing, introducing a risk compensation mechanism for GI trademark pledge financing.

The lending risk is shared by risk compensation funds, Quanzhou SME Financing Guarantee Co, rural credit unions, and appraisal companies in proportions of 40 percent, 35 percent, 20 percent and 5 percent, respectively.

Quanzhou SME Financing Guarantee Co has streamlined the approval process of GI trademark pledge loans. The company confirms the compliance of the guaranteed loan projects and no longer duplicates due diligence, reducing the workload of relevant parties and simplifying the loan application procedures.

It also offers preferential guarantee rates for GI trademark pledge loans to reduce financing costs for customers.

Up to now, rural credit unions and rural commercial banks in Quanzhou have extended a total credit of more than 200 million yuan for 12 GI trademarks. The average annual lending rate is much lower than the interest rates of loans to farmers in general, said Fujian Rural Credit Union's Quanzhou branch.

In Fuding, a county-level city in Fujian province, the white tea industry is a pillar industry of rural vitalization and Fuding white tea is a geographical indication product.

In 2020, tea gardens in Fuding covered an area of approximately 20,000 hectares, with tea production totaling 32,400 tons, of which 25,300 tons was white tea. More than half of the disposable income per capita for local farmers comes from tea.

In recent years, Fuding Rural Credit Union and the local government have jointly developed the Fuding white tea big data traceability platform, which traces the entire process of white tea production, promotes the standardization of the process and protects the brand value of the tea.

"By using drones to film tea gardens, the platform obtains and verifies information on the area of tea gardens, tea varieties and bush age to determine the yield of each tea farmer per season. The platform has collected business information of about 70,000 tea farmers, brokers and companies and created databases accordingly," said Xie Zhijun, head of the business development department at Fuding Rural Credit Union.

After verifying the tea gardens, information cards are created for each tea farmer. Tea brokers and companies can efficiently identify and collect information on tea leaves by scanning the QR codes on the information cards. Similar information cards are also created for tea companies as well as verified and registered tea brokers.

By the end of 2022, a total of 84,906 white tea traceability information cards had been issued.

Through collaboration with the provincial rural credit union, Fuding Rural Credit Union has developed a white tea financial rating system and launched a series of innovative loan products.

Tea garden information loans are unsecured loans issued by Fuding Rural Credit Union through the analysis of data available on the Fuding white tea big data traceability platform.

Loans are offered based on the area of tea gardens held by a farmer and their income from tea cultivation. The maximum loan amount is 200,000 yuan.

As of the end of 2022, 1,725 information loans had been issued, with a balance of 131.59 million yuan.

Fuding Rural Credit Union also offers a tailor-made loan product with a maximum amount of 500,000 yuan to tea brokers based on their trading records on the platform.

During the tea season, when the leaves are being put on the market, brokers have an extremely active daily cash flow and often face a shortage of working capital.

At the end of last year, the balance of loans extended to tea brokers reached 213.88 million yuan.

In addition, the lender has actively explored new models to activate rural production factors for tea companies and distributors.

It has launched a white tea warehouse receipt pledge loan business, providing loans of up to 2 million yuan per borrower to tea companies and merchants who hold white tea inventory.

Furthermore, Fuding Rural Credit Union has also allowed tea companies that meet the loan eligibility requirements to pledge their plant operating and possession rights in the form of a contract to Fuding Rural Production Factors Financing Platform based on the trading records of the Fuding white tea big data traceability system, in exchange for a loan.

The lender has effectively solved the long-standing problem of tea companies' inability to apply for loans by pledging their plant assets.

Currently, 54 tea companies have benefited from this new rural production financing model, with a total loan balance of 66.08 million yuan.