An Effective Way to Improve the Peasants’ Benefits Association

A New System to Support the Destitute and Develop the Rural Area

---Report on the Peasants’ Benefits Association in Yi Long

Hello, everyone.

It’s so glad to be here. I’m a secretary general of Association for Rural Development of Yi Long, Sichuan, China, which was built and developed from ten years ago. It is an independent juridical association to support the destitute and develop the rural area by micro credit in Yi Long. We got through everything, like success, failure, hesitation in these ten years. What we insist always is to develop from exploring, to summarize from developing, to progress from summarizing under a spirit of keeping to find the truth, never giving up. Today, the spring of rural development will be come soon.

Yi Long is a famous depressed area in China, and was confirmed to be one of the ‘Poverty Alleviation to Develop Harmonious Village Pilot Counties’ by State Council last year. While the discussion on how to establish a harmonious village was going across the whole country, the association reformed in 2 aspects after having studied the spirit of ‘Three Agricultural Policy’ by considering the reality of Yi Long. First, the association should be run in a business way. If we want to survive, there should have a governance structure of modern enterprise in the association. Having been transformed into joint-stock (from September, 2004), 5 branches run quite well now. Second, the reformation should target on poverty alleviation instead of the association interest. That is, we should improve to build the peasants’ benefits association mainly linked to the funds. (We learn that from what we did on the micro credit in the past 10 years) Our association and the benefits association should be part of one another, depend on one another, and be one interaction system together.

We are so pleased and fortunate that the supervisors from State Council Leading Group Office of Poverty Alleviation & Development paid high attention and support to our project of Peasants’ Benefits Association, whose principal part is peasants and main link is funds. With their strong recommendation and improvement, such project got powerful support from the government and council of our county and started to be tested in 5 pilot villages with 500k funds from County Finance Dept. We were being regarded, guided and supported all time in process, which guaranteed this project could work very smoothly. When Liu Director visited our county's poverty relief and development work last August, he evaluated highly for our improvement of building Peasants’ Benefits Association, which encouraged us very much. Now we'd like to report the pilot work in our county and look forward to your correction sincerely.

1. Policy to build the Peasants’ Benefits Association

1.1        Directed by ‘Three Agricultural Policy ’, based on Household contract responsibility system, depended mostly on the peasants.

1.2        Participated by every peasant under the reality of China has been considered, the steady and development of the community has been ensured, as well as under the support and supervise from the government.

1.3        Built by the marketing principle, based on the different demand from different rural area. To improve and direct the peasants’ mutual alleviation. To build the governance structure in the benefits association under the participation of peasants. To confirm the position of the peasants and confirm the responsibility that the benefits association should take according to the law.

1.4        The Peasants’ Benefits Association should have the activities under the improvement, direction, supervise of the village, and the regulations and law should be considered also. The target is to build a democratic, transparent system to manage, control and supervise better, which can guarantee the Benefits Association to develop longer and more safely.

Structure of The Peasants Benefits Association

                                                   Support

                   Support  Improve          Supervise   

             Supervise                        Cooperate             

Direct                             Interact    

2.How to organize

2.1  The destitute can get the stocks donated by the government, and the other peasants can get by purchasing in 1:1 way (RMB 1000/stock, no more than 2 stocks/family). What we really want is to improve how much the peasants are organized by helping, supporting them to build the mutual alleviation funds. That is: get the result of community organization by community currency.

2.2  The peasants would participate voluntarily after getting a good understanding on Association under having been directed, encouraged, advocated. The Association should be built democratically.

2.3  The internal governance structure, the regulations on how to manage funds would be established after having been discussed by the members of Association. The managements will be selected by the members too.

3. How to activate

According to our more than 10 years’ experiences unceasingly summarized from micro credit operation, we take the essence of micro credit, the short-term returns, as well as public, transparent, democracy central activity principle transplants to the management and development of the Peasants' Benefits Association. We help establish the management and development system. After getting all members’ approval, we confirmed in the regulations that all villagers would manage, benefit from and take the risk of the Association and fund. That is: the fund should be paid compensatively and achieved the goal that convenience for urgent funds, benefits for petty funds. The fund nominal interest rate is the annual interest rate 8%, the single loan and borrows should not to be able to surpass 5% of the total property. All lends do not need guarantee and mortgage, carry on that each 10 days to repay 1/36 capital and the interest to way operate the fund of the Association. On the foundation, help it establish interior organizational structure of cooperation cooperative organization, namely: The the Association management committee ---- center ---- group, the center generally is composed by the nearby 30-40 household member peasant household, every 10 days the Association organizes a central activity, major activity content:

3.1 By loaning and returning the funds in the central activity, established the platform for development of cooperation cooperative organization.

3.2 Loans and returns at the central meeting, not only is transparent, moreover the pressure collected by community's people is the guarantee of fund security. At present, this 5 peasant cooperative society established in our 5 villages, totally has 471 peasant households of voluntary participation, among: The government presents stock to 144 poor households, establishes the village fund total amount for 581,000 Yuan, government matches, presents stock total amount 363,000 Yuan, the farmer invests 218,000 Yuan, provides loans 260,400 Yuan by present, taking back rate 100%.(See the attached list: 5 villages’ detail). The first the Association, the Kun mountain village the Association, altogether has the village fund 96,400 Yuan, started from last August, altogether had provided 66 pieces of loans by present, the accumulation loans is 141,700 Yuan, the returns-ratio 100%, the interest income is not only to sustain the foundation of the Association’s basic cost, but also this year’s estimated each stock bonus may amount to 60 Yuan.

3.3 The discussion of loans for villagers in the central activity, impels the villagers’ intercommunion, mutually study, mutually help, mutually understanding and the harmonious coexistence.

3.4 In the central activity discusses the issues which a household solves with difficulty in the production development together, impels villagers' cooperative production, for instance the union buying and selling, the union processing, the series guard against the rule and so on, impels villagers' cooperation. At present the organization we established, all have started the organization cooperative production according to community's different demand, for instance: The Kun mountain village, everybody discussed how to unite to make the methane construction, totally has more than 90 households villagers, obtained the government support to establish the methane-generating pit under the organization of cooperative society. This year, the villagers rely on their own efforts to carry on the village path construction, under the cooperative organization’s impetus, achieve remarkable success. The HuZui village cooperative society based upon the problem that massive villagers feed the rabbit but do not make money, organized a training for household, after the training two feeds processing spots were established through the villagers’ discussion, which helped the villagers depended upon their own production to smash to grains to reduce the commodity feed dependence of rabbit raise, each half a kilogramme feeds reduced 0.5 Yuan, received a remarkable effect. At the same time, impels peasant household's union raising, there is a developing tendency that the small peasant household gradually change to the big one. Each cooperation organization all organized the activity that unite the purchase of producer goods in different degree. be deeply appreciated by members.

3.5 The central activity, is a very good self-education platform for farmer. Make good use of this platform, may make the education be contained in the farmer's production and their life. In the central activity they compared, study, catch up with and exceed, exchanges the market information and the good means of production and livelihood, impels farmer's self-education through peasant organization, and realize regularization. The government guides the farmer and propagandizes party's policy by training and guiding the administrative of cooperative organization, this is the best way and platform for farmer self-education.

IV. Functions that can be fulfilled by farmers’ mutual support organization

1. Functions that can be fulfilled from macro aspect

Firstly, sticking to the principle of market, the realization of the main body of the farmers in the mutual economic activities is established through the systems. Meanwhile, the nature of the organization  is established through systems that the farmers’ organization bears  responsible solely for the economic and civil responsibility.

Secondly, the simple easy and effective managing method of community funds we designed have been fully accepted by the farmers’ organization and farmers’ independent management is realized. The state public capital can motivate farmers’ finance, and promote effectively the establishment of sustainable rural development system, and effectively solve the shortage of farmer development capital. On the other hand, the profit from the rural capital is left to the community and farmers so that part of the profit is used to pay the basic development cost of the farm organization and the other part is returned to farmer as the second distribution. This method fully demonstrates the opening-up rural policy in farm organization and rural finance.

Thirdly, the establishment of farmers’ mutual fund in the effectively supporting and controlling system can realize low-cost operation and evade risk availably.

(1)  Information symmetry between managerial staffs and borrowers is the first step to risk evasion;

(2) Under this form of organization, the borrower does not have any subject motivation not to repay the loan, which is the second step to risk evasion;

(3) The short-time repayment method of the microfinance renders all the borrowing family the ability to repay the loan despite the family poverty, which is the third step to risk evasion;

(4) The mutual organization adopts the organization progress by farmers’ interaction and gives daily mutual help and support with confidence and technology, which is also an important link in risk evasion.

Fourthly, the establishment of such organization promotes the functional transformation of the grass root basic governmental organizations, breaks the habit of grass root governmental organization pushing the economic development by administrative method, which provides an effective path to the functional transformation of the grass root government.

Fifthly, the organizational level of farmer and agriculture’s entry into market is improved, market’s exploitation of farmers is lessened, and the farmers’ rights and interests in the process of operation are effectively maintained.

Sixthly, the two committees are assisted in organizing farmers to develop public construction in the village and democratic management of the village affairs.

2. Functions that can be fulfilled from micro aspect

1）All people with the producing and developing ability in the community have access to credit service conveniently, solving the problem that  many debtors  in the poor rural area cannot get credit service and hinder their development. At the same time, all the villagers know that they have the initiative of credit so that they will not hesitate owing to lack of capital when capturing market opportunity; instead, they can grasp the chance of development actively.

2) The small amount short-term payment is paid every 10 days or half a month, which makes the payment of total loan into 36 times a year. Pushed by the frequent pressure, farmers will bring into full play their potential. On one hand, they will save even 0.1 yuan on hand to repay the loan; on the other hand, they will pay 100% of the loan with sporadic operational and work income. The frequent payment pressure will force them to look for development opportunity in market. This progress is the best method to cultivate the farmers’ market operating ability.

3) By centralized payment and organizing farmers’ centre meeting activities, the farmers’ organization helps to fulfill farmers’ frequent and systematic self-education, facilitate the mutual study, communication and subtle influence among farmers, which makes it the best school for constantly cultivating farmers’ ability and quality.

V. Challenges and requests

1. Unable to register legally. None of the organizations are registered.

2. The government, as the leader in promoting the development of village farmers’ organization, needs to enforce the functional transformation of grass root organizations and the cultivation of participatory working method of grass root government, must change the traditional method of commanding and directing in operational activities, because  the traditional working method will lose its effect in such organization forms as well as harming the enthusiasm of the farmers’ organization and the relation between farmers’ organization and grass root governmental organization. The working method of grass root governmental must transfer to service, supervision, promotion, public relation and guidance.

3. Control in advance and effective routine supervision assures the successful operation of the newly-established farmers’ organization. For farmers’ mutual cooperative organization, any administration afterwards is of no effect, therefore, the establishment of controlling system in advance and routine supervision, support and help are vital.

4. We request special training funds to strengthen education, training and cultivation of farmers’ organization leaders and to ensure the healthy growth of farmers’ organization under the guidance and supervision of the government.

5. The farmers’ organization needs support and guidance especially at the very beginning to realize sustainable development farmers’ organization.

6.  We request credit support to farmers’ mutual cooperative organization. Currently, two of our five villages have granted all the funds and government can give appropriate credit support based on its effective operation. Meanwhile, we request government to provide discount according to the annual credit amount of the farmers’ mutual cooperative organization to help the development of the farmers’ organization.

Appendix: Basic Info of Village Farmers’ Mutual Help and Cooperative Organization in Yilong

Association for Rural Development of Yilong

Gao Xiangjun

June 12 2006