Reaching New Heights

China, May 10, 2005

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    Village leader Zhong Cheng Jing of Chaiyang, China stands in local tea fields. Mercy Corps is helping area families improve their agricultural yield through small loans. Photo: Jeremy Barnicle/Mercy Corps Photo:

Fuan, a bustling coastal city of three million people, appears to have a lot going for it: plentiful natural resources, an important military base and a major trading partner just across the water.

But there's a problem: the trading partner across the water is Taiwan. Local government officials say Fuan was long considered the first landing point for a Taiwanese assault on the Chinese mainland. As a result, the area never attracted the kind of investment that has propelled so many other Chinese cities forward.

The region's economic stagnation has been felt most acutely in low-income and ethnic minority communities, so Mercy Corps has partnered with the China Foundation for Poverty Alleviation, the government of Fuan County and Nike to improve earning prospects for the farmers and fishermen of the area.

Since the program was initiated in this region four years ago, Mercy Corps and its partners have given almost 13,000 loans worth approximately 18 million yuan, or $2.1 million. The Chinese government provides about 60 percent of the funding for the project.

Among the terraced tea fields

In the one-room building that serves as town hall and community center, village leader Zhong Cheng Jing explains a chart on the wall to visitors.

"This is how much people have paid back, and when," says the animated 40-year-old. "Everyone in the village knows who's keeping their commitment, so our repayment rate is excellent."

The people of Chaiyang, a remote mountain village tucked among terraced tea fields, participate in a Mercy Corps microfinance project that provides small loans to low-income farming families, allowing them to invest in livestock, fertilizer, and equipment.

Currently, about a quarter of the village's 120 households have taken out small loans from Mercy Corps.

As Mr. Zhong says, the repayment rate is excellent and, two years into the project, the quality of life in Chaiyang has increased significantly.

"An investment of 1000 yuan (about $120) in fertilizer yields an additional net profit of 2,000-3,000 yuan a year in tea sales for a family," he says. "That's a major improvement in this area."

Mr. Zhong reports that families have used the additional income to reinvest in their farms, improve their homes, buy better food and send children off for more schooling.

A valley of vineyards

On the other side of the mountain, in a village called You Ao, Zhong Su Ze and his wife are proud to show off their acres of grapevines.

"Before we had these loans, there was none of this," says Mr. Zhong, sweeping an arm across a landscape choked with vineyards. "Now we all have work and we all have income."

Mercy Corps has been issuing small loans in this village for four years. The repayment rate is more than 97 percent.

The fertilizer and insecticide the Zhongs have bought with their loans have made their land far more productive.

"We used to earn 4,000-5,000 yuan ($480-600) a year, but now we make at least 10,000 yuan ($1200)," Mr. Zhong says. "We can afford to send our daughters into town for school and we're even thinking about starting a little store."

The loans Mercy Corps and its partners provide are critical to economic growth in villages like Chaiyang and You Ao. Commercial borrowing is out of the question for the rural poor in China and even the Chinese government's Rural Credit Cooperative (RCC), which exists to help such communities, sets the bar too high for many in these villages. Therefore, access to credit is extremely limited and farmers have no other means to make investments in their land and businesses.

Meeting the unfulfilled demand for credit is Mercy Corps' goal with microfinance in rural China and around the world.