MICROCAPITAL STORY: China’s Wuyuan County Rural Credit Union Receives ISO Certification

China’s pilot micro credit program Wuyuan County Rural Credit Union received ISO 9001:2000 certification. This credit union provides micro loans to farmers in Wuyuan County in China’s eastern Jiangxi Province. ISO certification is maintained by the International Organization for Standardization, an international-setting body composed of representatives from various national standards organizations. Certification is administered through an independent, third-party audit by an accredited certification body; the Wuyuan County Rural Credit Union did not specify which external auditor was used. The ISO 9001:2000 standard certifies that consistent business processes are applied and that a company internally conducts paperwork prescribed by the standard. The ISO 9001 certification does not guarantee that a company delivers superior or decent quality products.

Wuyuan County Rural Credit Union began in 2000 and in its first year provided 23,519 households or nearly half of total rural households in the county with 150 million yuan (approximately USD 21.1 million) in loans. Wuyuan County Rural Credit Union does not report to the Mix Market, the microfinance information clearinghouse.

In 1999, the central government began experimenting with micro-lending programs through the rural credit cooperatives (RCCs), including one within Wuyuan County. In 2001, the People’s Bank of China (PBC) asked all RCCs to provide “Wuyuan mode” micro-lending programs, achieving 90 percent participation rate.

The program uses committees of selected village residents to rate the credit worthiness of all village households based on income, past borrowing, loan repayments, and their reputation with neighbors. Each household is assigned a risk class, and qualifying households are given a certificate that can be redeemed at the local RCC for a loan amount set for their risk class. The PBC provides the majority of funding for the micro-loan, as well as guidance for interest rates.

Historically, China’s collective land-ownership system has made agricultural borrowing and investment difficult. Given the lack of land ownership, farmers have little in the way collateral to secure long-term loans. Furthermore, farmland can not be bought or sold, preventing consolidation of land and economies of scale achieved by larger operations.

With 44 percent of China’s employed population in agriculture, the central government began using microcredit programs to boost farm borrowing and investment. As of 2003, there were 34,577 RCCs with a total lending portfolio of 1.2 trillion yuan (approximately USD 145 billion). To date the RCCs have provided more than 900 billion yuan of total loans (approximately USD 126.6 billion) to roughly 25 percent of all rural households. In addition, the balance of micro loans among Chinese banks is listed at roughly 204 billion yuan (USD 28.7 billion).

The article announcing the ISO certification was published on Xinhuannet.com, a website sponsored by state-run Xinhua News Agency. Furthermore, the piece suggests that the central government views the ISO certification as recognition of China’s micro-lending efforts and development. However, there is no indication as to whether or not more RCCs will attempt to gain similar international standard certifications.

by Jennifer Lee

Additional Resources:

ISO: Home, 9001 certification

China: Microcredit Regulation, MixMarket Profile

China View: “China’s Rural Micro Credit Program Wins Int’l Recognition.” February 27, 2008.

“The Development of Microfinance in China”, by Ruomei Sun, Rural Development Institute, Chinese Academy of Social Sciences, 2003.

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