Hangzhou, China, July 11, 2006-
Bert Heemskerk, Chairman of the Executive Board of the Rabobank Group, Karin Finkelston, Associate Director for East Asia at the Pacific at the International Finance Corporation, and Zhang Chen, Chairman of the United Rural Cooperative Bank of Hangzhou, signed an agreement today in Hangzhou for Rabobank and IFC to acquire 10 and 5 percent shares, respectively, in URCB. This marks the first foreign equity participation in a Chinese rural cooperative bank. This pioneering cooperation is expected to have a far-reaching effect on Rabobank, IFC, and URCB, and to serve as a valuable precedent for the restructuring and reform of China’s rural credit cooperatives.
This acquisition forms part of the Rabo Development Program, which supports the growth of modern rural banking in developing countries. It also constitutes a major step in IFC’s financial sector strategy in China, which has recently been focused on restructuring and reforming city commercial banks. In addition to the investment in URCB, Rabobank will provide management and technical support to help further corporatize and modernize its operations. Rabobank and IFC will initiate technical assistance programs to advise the bank in a range of areas, including administration and management, business development, distribution policy, marketing, credit control, risk management, and IT systems development. Rabobank will send a senior staff member to URCB to help execute this technical assistance program and, in partnership with IFC, will advise the Chinese authorities on rural cooperative reforms at the provincial level in Zhejiang Province, where URCB is located.
Bert Heemskerk of Rabobank said, “It is fantastic that we are the first foreign bank to be given the opportunity to assist URCB in its further development. Our Chinese partners attach a great deal of value to Rabobank’s cooperative principles, which correspond in many ways with their own cooperative banking system. These shared cultural values form the foundation for a productive partnership in the future.”
IFC is using its extensive experience in investing in Chinese financial institutions to help structure this pioneering transaction. IFC’s technical assistance funding will also support rural cooperative sector reform at the provincial level and will complement Rabobank’s technical assistance program. IFC will place on URCB’s Board of Directors a senior banker with extensive Chinese and international banking experience who will provide ongoing guidance to the bank’s management as it develops into a modern and sophisticated financial institution.
“Reforming the rural credit cooperative system has a profound impact on rural development and poverty alleviation in China. This project aims to set a benchmark for the country’s rural cooperative banks. IFC is committed to helping URCB strive for high standards in corporate governance, disclosure, and environmental and social responsibility, so that this institution can lend strong support to reform of China’s rural financial sector,” said IFC Executive Vice President Lars Thunell.
Zhang Chen of URCB said, “Both Rabobank and IFC have rich experience in modern banking management and operations. With this cooperation, URCB hopes to improve its corporate governance, introduce advanced managerial skills, and enhance its competitiveness.”
Chinese rural credit co-operatives
Rural credit cooperatives have existed in China since the 1950s. They are in most instances the only credit providers in rural areas. The Chinese government has made developing the credit cooperatives into full-fledged banks a top priority. The strategy at the district level is to merge the present rural credit cooperatives and the district union and to transform them into a rural cooperative bank (RCB) or rural commercial bank. This requires restructuring the loan portfolio and recapitalizing the bank. The shareholders of an RCB are normally staff members, private individuals and farmers, and small and medium enterprises. Zhejiang Provinces was selected in 2004 as one of eight pioneering provinces for transforming the credit cooperatives. The rural population and small businesses in Zhejiang and its capital city Hangzhou have a growing need for financial products and services.
Rabobank Group
Rabobank Group is a full-range financial services provider founded on cooperative principles. The group is comprised of 248 independent local Rabobanks in the Netherlands, the central organization Rabobank Nederland, and a large number of specialized subsidiaries. The group’s core objective is to generate the highest possible customer value. To this end, the organization offers its clients all the financial products and services they need. In the Netherlands, Rabobank provides services to more than half the population and has dominant market positions in almost all areas of financial services: home mortgages, savings, small and medium businesses, and the food and agriculture sector. It has also significantly strengthened its position in the large corporate market. Worldwide, Rabobank Group, through Rabobank International, focuses primary on financing the international food and agriculture business, a niche market in which it has a leading position. Rabobank Group has been awarded the highest credit rating (AAA) and has 267 offices in 38 countries outside the Netherlands.
Rabobank has been active in China since 1989 and has offices in Shanghai and Beijing. It received the renminbi licence in 2004. Rabobank is also active in Hong Kong, where it has operated a branch office since 1984.
United Rural Cooperative Bank of Hangzhou
URCB is a joint-stock cooperative financial institution focusing on local communities, formerly known as Hangzhou Rural Cooperative Union, with 23 rural cooperatives under its control. URCB has total staff of 1,130 and a network of 112 outlets. At the end of June 2005, it had a total deposit balance of RMB 24.3 billion, a total loan balance of RMB 18.1 billion, and total assets of RMB 30.5 billion. Its nonperforming loan ratio was well controlled at below 1.5 percent. Since taking its new name, URCB has continued service the agricultural sector, farmers, and economic development in rural areas. It has continuously worked for local residents and smaller enterprises by providing financial products to help farmers increase their income and to facilitate the development of local economy. In the rural area of Hangzhou, URCB dominates the market in credit and loan business to retail clients and small and medium enterprises. URCB also continues to expand its scope of services, including a foreign exchange business that it hopes to develop it into a distinguishing feature of its operation.
International Finance Corporation
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC
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www.ifc.org
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is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications.
