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ADB Loan to Help Scale Up Production, Financing For Gansu Farmers

News from Country Offices | 13 November 2015

BEIJING, PEOPLE’S REPUBLIC OF CHINA — The Asian Development Bank (ADB) has approved a $100 million loan for a project to help farmers in 11 counties in southeastern Gansu province expand and diversify production and increase access to markets and finance.

“Farmers with small plots and limited resources struggle to move beyond subsistence farming and most of those in the project areas are poor and vulnerable,” said Yi Jiang, an ADB Senior Economist. “This assistance, which will be provided through partnerships with local banks, will help overcome some of the impediments to funding and allow farmers, farmer cooperatives and small and medium agro-enterprises to expand output and link to profitable markets, resulting in increased incomes.”

In the project area, farm sizes average just 0.17 hectares, households have few productive assets, and the bulk of crops are marketed though local brokers who earn a major share of the profits. Farmer cooperatives and agricultural small- and medium-sized enterprises have emerged but they struggle with limited capacity and face difficulties sourcing credit. Rural financial service providers, including rural banks, microcredit companies and rural mutual cooperatives, have emerged in recent years to support farmer financing but they are at an early stage of development and face legal, technical, and funding constraints. 

The project aims to overcome these barriers by providing funds to help farmers and farmer cooperatives develop commercial production bases and improve the quality of cash crops and livestock so they have higher market value. Assistance will be given to help farmers adopt climate-smart agriculture practices including using water more efficiently. Farmer cooperatives will be strengthened with the provision of equipment, training in business and financial management, and support to build marketing networks. 

ADB will also partner with three local commercial banks—the Bank of Lanzhou, Bank of Gansu, and the Yuzhong Shanghai Pudong Development Rural Bank—to onlend some of the loan proceeds to rural financial service providers, allowing them to expand assistance to farmers and farmer cooperatives, to establish grassroots village offices, and to pilot test innovative new financial services and products. The goal is to use financial intermediary banks to help develop a dynamic and competitive rural financial market that can meet the local demand for funding and services. 

The project, is expected to benefit more than 27,000 rural households over 5 years, with at least 30% of the beneficiaries expected to be poor and about 30% women. As the loan proceeds to farmer households are repaid and recycled the number of beneficiaries will multiply. 

Along with ADB’s assistance the financial intermediary banks will contribute the equivalent of nearly $68.6 million, with beneficiaries contributing in-kind assistance equivalent to nearly $25 million, and the Gansu Provincial Government nearly $7 million. 

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members—48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.