China-Africa: Experiences in Rural Finance Development in China and Africa

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A seminar on the exchange of experiences in rural finance development in China and Africa was held on Monday in Maputo, Mozambique, within the framework of the 2008 African Development Bank (AfDB) Group Annual Meetings. The seminar was an occasion for participants to share experiences on reforms regarding financial services and innovation in rural development and to discuss the role of financial services in rural development. Both parties were therefore able to share experiences in reforms and development of financial services and established new grounds for cooperation and mutual development.

The issues discussed included policy and measures to promote rural finance reform in China; experiences and lessons of rural financial development in China (including financial institution reform, financial innovation and financial market development); exploration and practices in commercial and sustainable micro-credit in China; the development of rural finance and challenges in Africa and China; and problems and experiences in rural finance development in African countries; as well as channels and ways of cooperation between Africa and China in rural finance.

The event made it possible for participants to examine the means to promote a better understanding of achievements, future perspectives and common issues relating to financial services development in rural areas; and to explore the possibility and methods of cooperation in rural finance.

China, a country with 1.3 billion inhabitants, has some 800 million people living in rural areas. This reality makes the development of farmers, agriculture and rural regions a major concern of the Chinese government. According to seminar participants, China has established a multi-level rural finance system, which includes rural cooperatives; commercial banks and the China Agriculture Bank. At the end of 2007, the overall agricultural credit package of all financial institutions stood at 6093,885 billion yuans (1 dollar = 7 yuans), accounting for 21.92% of credits by all financial institutions. Among the reasons for success, participants mentioned the 1978 business reforms. They also highlighted diversified demand and supply; a stable financial market and improved risk integrated in the reform framework with one of the major innovations being owning part of these banks’ share capital. This has aroused the interest of major global financial groups. The simplification of the Chinese system is also a major success for China.

Speaking during a presentation, the AfDB vice president responsible for agriculture, Zeinab El-Bakri,  underscore the importance of agriculture in African economies; as well as challenges and lessons learned. She also highlighted the prospects the sector presents. She said that the current food crisis was putting agriculture in the front burner, underlining that agriculture-related GDP had a multiplier effect on other sectors. Some of the challenges facing the sector include a reduction in agricultural credit, low state and donor programme performance and the impact of subsidies by the state. Regarding lessons learned, participants pointed to the lack of long term financing and the lack of institutional infrastructure.

Another lesson learned is the need to continue seeking financing for rural credit. The Bank Group is focusing on the sustainable improvement and development of the financial sector on the continent in general and agricultural financing in particular. The AfDB has also expressed its readiness to reflect on all issues relating to infrastructure. This move will be based on experience sharing and the establishment of strategic partnerships.

Financial services are of great importance in efforts to support economic development in rural areas. Agriculture plays a crucial role in a country’s economic development. In less developed countries such as China and African countries, agriculture accounts for a large share of national production and it is crucial to economic development.

It should be recalled that the level of economic development and the nature of economic systems differ from one country to the other. The role financial services therefore play also vary. Over the last years, many countries, including China and African countries, have recorded significant results relating to research on financial services development.

Similarly, building a new socialist countryside is a task of great historical importance in China’s modernization process. Reforming and improving rural financial service is crucial in this process. The construction of a rural financial service mechanism is of great importance in promoting rural economic development, building a long-lasting mechanism to support agriculture, maintaining long-term stability in the countryside, narrowing the gap between the rich and poor as well as the gap between the rural and urban areas and creating a harmonious socialist society.

Through years of reform and development, China has set up a rural financial system that is based on cooperative finance with division of work and coordination of effort between commercial finance and policy finance. Currently, financial services are available in most rural areas in China. The Chinese government has paid great attention to rural financial reform; a series of measures to improve the rural area financial service have been taken. Great achievement has been made in financial institution reform, institutional construction and financial innovation. Much experience has therefore been acquired.

China shares many similarities in rural economic development with African countries. Agriculture is crucial in China’s national economy as a whole. The rural financial service in Africa faces problems that are similar to what China faces. These similarities provide a basis for rural financial communications between China and Africa. China is willing to discuss the effective measures that can help promote rural finance development and how to improve services within African countries

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