Backed by a huge guarantee fund set up by the United Nations Development Programme (UNDP) and All-China Federation of Trade Unions (ACFTU), the first batch of 16 laid-off workers in Jiaozuo, Henan province received seed money ranging from 10,000 to 50,000 yuan (US$1,204 to US$6,204) yesterday.

For middle-aged Fan Ailing, the small-scale loan has come at the right time for business expansion.

"The loan is timely because I'm short of cash after my flower and fruit shop was set up at the beginning of this year," said Fan, who was laid off in 1998.

She opened a small supermarket soon after borrowing capital from relatives and friends. Despite making a profit, she had to look elsewhere as there was too much competition among supermarkets.

"Business ideas are easy to find but no bank is willing to grant loans to laid-off workers because their credit-rating comes under question," said Fan, adding the UNDP and ACFTU have created an ideal mechanism to effectively assist laid-off workers.

According to the agreement signed by the UNDP and ACFTU, about 3,000 laid-off workers in the province are set to benefit from the loans by 2005.

A fund of 5 million yuan (US$602,409) has been earmarked by the organizations and local governments.

During yesterday's ceremony for the launch of the micro-finance guarantee fund in Jiaozuo, a UNDP representative said: "Today is a day for celebration as the first laid-off workers are getting loans to start their new businesses and begin new lives."

And also according to Macleod Nyirongo - the senior deputy resident representative of the development programme's Beijing office - the UNDP is trying to find ways of addressing a number of key issues in relation to micro-finance including coverage, transaction costs, interest rates and technical services that are needed to ensure the profitability and sustainability of the small businesses.

"But the present guarantee fund mechanism set up in Henan Province has a limited lending capacity and therefore we need to be selective, as some of the laid-off workers may need help more than others," Nyirongo said.

The project also aims to build the institutional capacity of trade unions in the transition to a market economy and to promote and protect the rights and interests of workers, particularly those who have been laid off, he said.

Jiaozuo is a typical industrial city in China with many laid-off workers because of economic restructuring.

China's economic reforms, particularly of loss-making State-owned enterprises, have led to millions of people losing their cradle-to-grave benefits.

Tackling unemployment and keeping the economy booming are top government priorities.

Official statistics show 7.75 million people in the country were registered as unemployed in urban areas at the end of March, a rise of 750,000 over the same period last year. The registered unemployment rate was 4.1 percent.

But analysts say the official jobless rate vastly underestimates unemployment because it does not include laid-off workers of State firms.

(China Daily July 9, 2003)