Earthquake survivor and entrepreneur from Beichuan County, Sichuan
By: Elaine Chou, PlaNet Finance Director of Administration & Finance
Beichuan County is located in northeast Sichuan up the mountains. Beichuan is a quiet rural area with its main economies being farming, animal husbandry, forestry, mining and producing handicrafts. Beichuan is mostly populated by the Qiang minority group and is the only county in China to be classified as an autonomous county, ruled by the Qiang people.
On May 12, 2008, the whole county town of Beichuan was flattened due to a 7.9 magnitude earthquake. Casualties in Beichuan County alone exceeded over 7,000 accounting for roughly 4% of the pre-earthquake population. While the government helped facilitate some interest-free loans for rebuilding homes, many displaced residents could no longer depend on farming and so had to develop new small businesses, or needed financing to restart operations within their existing micro-enterprises.
Beichuan VTB is a village bank that was founded in 2007 to specifically address the financing needs of the Beichuan population. Unfortunately the entire VTB was destroyed during the earthquake, with many of its clients injured or killed. PlaNet Finance was asked to help rebuilt operations at the VTB by developing a comprehensive business plan. Beichuan VTB is unique in that it is the only VTB in China that operates out a single geography county area. Beichuan VTB currently also operates in neighboring An county and Fucheng district, both also earthquake-affected areas.
During its recent mission, PlaNet Finance met Li Tang Hui, a Beichuan VTB client with a strong entrepreneurial spirit and an inspirational story. Mrs. Li is a small business owner living just outside the old Beichuan County center and is one of the 30 million Chinese getihu – registered, non-incorporated small businesses owners. She has two businesses: producing wine from fermented corn, and raising and selling pigs. She also has a third side business of transporting rocks for local cement companies in the area. Her businesses were quite successful as she has been able to capture synergies between the pig and wine businesses, as both use corn that she is able to buy in bulk.
Mrs. Li was first introduced to the VTB through a government official in early 2008. When she heard that a new bank was lending to small businesses in Beichuan County, she decided to apply for a loan to expand her business. She took out a 100,000 RMB loan to buy more pigs, feed and a new truck. The loan was a six month loan at 8% annual interest, which she paid back in one month. The loan enabled Mrs. Li to expand her business to have 150 pigs, despite her short-term liquidity needs. Mrs. Li was extremely pleased with her experience with the VTB, and had decided she wanted to take out another loan in order to double her pig farm to 300 pigs.
However the Sichuan earthquake forever changed her life, Mrs. Li sadly lost her grandson to the disaster. Her house was completely demolished, and she found herself having to rebuild her life, as millions of others had to do. Like most in the area, Mrs. Li did not have housing insurance. In order to rebuild her house, Mrs. Li received interest-free government subsidized loans from the local RCC and the military, in addition to paying for funds out of her own pocket.
After a year and a half of hard work, Mrs. Li has been able to rebuild her home and businesses. Once operations at Beichuan VTB restart, she believes she will take out another loan to expand her pig farm, or buy another truck to transport more rocks as more cement companies have entered the area due to rebuilding efforts. In addition to having access to financial services, the speed and efficiency of receiving small loans is important to small entrepreneurs like Mrs. Li, who are able to identify opportunities within the market and must react on these opportunities instantly. With the reestablishment of the VTB hopefully to be completed by mid-2010, individuals like Mrs. Li will receive a boost towards rebuilding their lives and once again benefit from improved financial services and economic freedom.
