Friday, October 30, 2009

New Mutual Aid Funds in Zhejiang

Zhejiang Province introduced new regulations allowing registration of rural mutual aid funds. The regulations were jointly issued by Zhejiang’s commerce bureau and provincial branch of the bank regulatory commission, and they took effect October 28.

The mutual aid funds are described as a cooperative-style community banking organization that can take deposits, make loans, and perform settlement business. They can only do business with members, and business must be in the local community; they cannot form branch organizations. They can be established at the township level with minimum investment of 300,000 yuan (under $44,000) or at the village level with 100,000 yuan ($15,000). No member's share can exceed 10% of the value of stock; bank regulator approval is required if a member's share exceeds 5%.

The article notes that farmers and small rural enterprises can "voluntarily" form mutual aid funds at the township or village level. This contrasts with the rural credit "cooperatives" that everyone was forced to join in the 1950s.

The reporter says many rural financial institutions in China take deposits but don’t make loans, with the funds mostly going into city financial organizations. In recent years, rural mutual aid funds have been tried as pilot programs in many areas of China. From now on, Zhejiang also can also organize this kind of “rural bank.”

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