MICROCAPITAL STORY: Standard Chartered Joins Rural Microfinance Campaign

Standard Chartered (Stanchart) Bank recently announced that it would launch its first microfinance program in China. The program will initially provide working capital loans, without pledge or guarantee, to local cotton farmers. The loans will be disbursed to farmers through an entrustment loan arrangement with the local Awati Credit Cooperative. The maximum loan size is intended to be CNY 15,000 (USD 2,050). This marks the first time that a foreign bank has established a complete microfinance program which lends directly to farmers in China.

Standard Chartered is a London-based international bank that operates in over 50 countries worldwide. In 2006, StanChart had USD 266 billion in total assets, USD 249 billion in total liabilities and USD 17 billion in total equity. StanChart Group has developed 35 alliances with MFIs across Asia and Africa. The group also made a Clinton Global Initiative pledge in 2006, promising to channel USD 500 million over five years to MFIs in Africa and Asia.

In addition to providing loans to farmers, the bank will team with leading cotton shirt maker Esquel Cotton Investment, Ltd. to provide training courses to teach farmers basic financial and operational business concepts. Because Esquel has established relationships with many of the cotton farmers, it is expected that the company will also act as a strategic partner to Standard Chartered. Esquel Group is one of the leading producers of cotton shirts, manufacturing for such brands as Tommy Hilfiger, Hugo Boss and Brooks Brothers.

Some industry analysts see this program launch as a way for the bank to gain experience to possibly establish a rural bank in the region in 2008. The recent enthusiasm from foreign banks entering China’s rural banking market is largely the result of the lifting of Chinese government restrictions on such entities. At the end of 2006, the China Banking Regulatory Commission lowered the registered capital threshold to CNY 3 million (USD 410, 800) for banks at the country level, and CNY 1 million (USD 136,900) for those at the village and town levels. CEO of Standard Chartered Bank (China), Katherine Tsang, supported these reforms and reiterated StanChart’s commitment to banking the poor: “Standard Chartered Bank fully supports the government’s policy of expediting the reform of the rural financial system and is committed to active involvement in rural finance projects.”

Additional Resources:

ChinaDaily.com: “Standard Chartered joins rural finance campaign.”

Standard Chartered Bank (StanChart)

StanChart Group: Annual Report & Accounts 2006: Consolidated Balance Sheet

StanChart Group: Annual Report & Accounts 2006: Business Review – Sustainability

Microfinance Gateway: “Standard Chartered Bank Commits US$500Mln Towards Microfinance in Asia & Africa.”

Esquel Group

Bloomberg.com: Currency Calculator

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