Zhang Deping's shipping business provides a decent life. He owns two boats and transports coal and sand along the Yangtze River.

But this year the self-employed Zhang wants to buy a truck to transport raw materials more efficiently. His son can also use it to provide local transportation, making some extra money for the family.

A man uses a Citi ATM machine in Beijing. The US bank opened a micro credit firm in China's Hubei province in December. [China Daily]

The 46-year-old visited several financial institution outlets in the county before approaching a lending company set up by US financial giant Citi. The loan officer calculated his cash flow, developed a budget analysis and then gave Zhang a 130,000 yuan home equity loan.

Zhang had the loan in 10 working days.

Citi, one of the world's largest financial conglomerates, is the first international player to set up a micro credit firms in China, penetrating the vacuum created as Chinese banks closed 9,800 rural branches over the past three years because of mounting soured loans.

The Gong'an Citi Lending Co has 12 million yuan registered capital and offers up to 200,000 yuan of secured and unsecured loans to local farmers, start-up businesses and self-employed individuals.

The outlet is run by a rural banking veteran and employs eight people and offers interest rates that are competitive but make sense to both the bank and the borrowers.

Its major rivals, including HSBC and Standard Chartered Bank, have launched several outlets in the nation's countryside, where more than 7 percent of townships or counties (about 2,800 in all) have no access to credit, according to the central bank's October report.

"We understand the importance of increasing the efficiency and availability of financial services in China's rural economy," said Andrew Au, chairman of Citibank China and CEO of Citi China.

The US financial giant will open a second lending company in Chibi, also in Hubei province, in the first quarter of 2009.

Despite enhanced efforts to develop rural finance in recent years, highly inadequate financial services remain a serious problem in China's vast, underdeveloped regions. The situation prompted China's banking regulator to extend a program allowing foreign and domestic financial companies to set up banking institutions in rural areas from the originally planned six provinces to the whole country.

Citi, its global business embroiled in the financial crisis, plans to accumulate experience before it makes further forays into other rural areas.

Citi set up in Gong'an as a lending company rather than a rural bank to avoid the loan-deposit ratio required of rural banks. The ratio could lead to a shortage of lending funds owing to insufficient deposits.

Gong'an, a county under Jingzhou located roughly 1,300 km southwest of Beijing, is also not a typically underdeveloped regions cut off from bank services.

The county, covering an area of 2,200-sq-km and having a population of more than 1 million, is home to 77 outlets set up by eight Chinese banks and rural cooperatives, which all generate profit unlike their businesses in other parts of less developed areas, said the county's executive deputy head Wang Yong.

"Our goal is to have an in-depth understanding of the market before we expand our customer base," said Zhang Kai, director of Citibank China's franchise development department. "To reduce risks, we won't start with large corporate clients. We will expand our product line and customer based only after we have sufficient experiences."

Anand Selva, executive vice-president of Citibank China, said that "we intend to ensure that the lending firm becomes sustainable and profitable".

(China Daily January 5, 2009)