Center

Insurance, bankcard ease farmers' financial woes

(China Daily)
Updated: 2006-10-04 08:35

To solve the problem, the People's Bank of China (PBOC), China's central bank, is offering a bankcard tailored to migrant workers that will enable them to withdraw money at their local rural co-operatives after they deposit it in a bank in a city where they work.

"With a successful pilot experience in Southwest China's Guizhou Province, we aim to expand the business in 11 other provincial-level jurisdictions this year," said Su Ning, PBOC vice-governor.

Guizhou was a logical choice for the pilot project. Four million migrant workers from there last year amassed a total income of more than 30 billion yuan (US$3.75 billion) which accounted for 15.4 per cent of the provincial gross domestic product.

In addition, all the rural co-operatives in Guizhou were integrated into one network last year and joined China UnionPay, the Shanghai-based operator of the country's integrated system that uses bankcards for payment.

The China UnionPay bankcard network for farmer-turned-workers was launched on November 29, 2005. Using a bankcard issued by the Industrial and Commercial Bank of China or the Guizhou branch of the Agricultural Bank of China, the card holder can withdraw money or make deposits at Guizhou's rural co-operatives, including those branches in towns and villages.

At the end of June, statistics from China UnionPay showed that transactions totalling 24.5 million yuan (US$3.1 million) had been made in the first half of 2006, a year-on-year increase of 54.2 per cent in volume.

"The success of Guizhou's pilot project paved the way for the spread into other areas," Su said.

The expansion into the 11 other jurisdictions has been divided into two phases. Hunan, Jiangsu, Shandong, Jiangxi and Fujian provinces and Chongqing Municipality were scheduled to be online by September 30; with Henan, Shaanxi, Sichuan and Yunnan provinces plus the Guangxi Zhuang Autonomous Region following by the end of the year.

According to Lin Caiyi, a China UnionPay senior researcher, the bankcard business for migrants is more like a charity activity than a commercial venture.

"In that case, how to achieve the profitability of card issuers will be a major challenge," Lin said, adding that transaction charges to farmer-turned-workers are lower than those to regular consumers.

"But banks, as a commercial entity, go after profits. Without a market drive, such business is not likely to be durable. And it is unrealistic to ask small rural co-operatives or banks to shoulder the loss from that business."

The best solution, Lin said, lies with the participation of local governments. Through preferential tax rates or fiscal subsidies, the governments can help banks achieve a balance between profitability and social responsibility.