Chapter 167: Micro-loans

“The difference is vast,” Wu Nanhai explained. “Landlords are not a monolith. The ones we are most familiar with are the rentier landlords, those who divide their land into small plots and lease them to tenant farmers. According to the traditional landlord-tenant relationship in China, once the land is leased, the tenant decides what to plant and how. As long as the rent is paid, the landlord has no right to interfere. In some cases, they even forfeit the right to replace the tenant. Consequently, they have little interest in improving agricultural technology. Their primary concern is managing their tenants and ensuring the timely and full payment of rent.”

“Managerial landlords, on the other hand, are more akin to modern agricultural capitalists. They hire laborers, both long-term and short-term, and pay them wages. Some are even tenants themselves, driven by a strong desire to extract maximum profit from the land. Since they cannot simply raise the rent, they must increase the land’s output. Their demand for agricultural technology is therefore much stronger.”

“A tenant who is also a landlord?”

“Heh, you must be unfamiliar with the term ‘tenant-rich peasant’ from the land reform era. It’s not entirely accurate to call such individuals landlords. They are professional land managers, often with substantial capital or specialized skills, who lease large tracts of land from landlords and profit by cultivating high-value cash crops.”

“I see,” Wan Lihui nodded, a touch of shame in his voice. “And to think I come from a peasant family…”

“The rural society you knew is a world away from this,” Wu Nanhai said. “Here and now, in Guangdong, Fujian, and the Jiangnan region, managerial landlords are a rising force. However, their focus is primarily on cash crops; those who concentrate on grain are rare. These are the ones we must support.”

“Managerial landlords have a capitalist bent,” Ye Yuming observed. “They represent the advanced productive forces of this era, do they not?”

“Precisely. Therefore, our agricultural policy is to support the managerial landlords, protect the independent farmers, and squeeze out the rentier landlords, gradually forcing them to either disappear or transform.”

“What about the tenants? If we eliminate the rentier landlords, the tenants will lose their livelihood. The Executive Committee has no plans for land reform, so how do we address the land issue for this group? Under the tenancy system, they at least have a means of survival. If we get rid of the rentier landlords, will they not starve?”

“Lincheng has plenty of wasteland. We can provide them with seeds and plow oxen, help them reclaim land, and organize them to build irrigation systems…”

Wu De objected directly. “All that effort will only create a new class of small independent farmers in Lincheng. We have no need to expand the base of independent farmers here—it’s of no use to us.”

“It’s not a bad thing. Small independent farmers will fight desperately to defend their homes and land.”

“The working class will fight just as desperately, and since they have nothing, they won’t be distracted by thoughts of going home for spring planting or autumn harvest,” Wu De quipped. “In truth, to defend one’s home, the common people don’t need fifty mu of land. A prosperous, stable, and happy society is enough.”

“As for absorbing surplus labor, industry is the simplest solution,” Wu De continued. “And then there is agriculture itself. We don’t need farmers; we need agricultural workers. With the exception of a few crops, everything will be cultivated intensively on large tracts of land.”

Wen Desi coughed, about to speak, when Li Quan from the farm entered, carrying a tray with delicate care. The young girl, rescued from Gou Family Village with her mother by Zhang Xingjiao, had blossomed into a rather charming loli after more than half a year at the farm. She wore her dark hair in two neat braids and was dressed in a clean, thin silk shirt. Her large eyes sparkled with intelligence.

“Chief Wen, please have some tea,” Li Quan said, her voice as sweet as her smile. Though young, she was well-acquainted with the key figures of the transmigrator group—the “big shots” who were frequent visitors to the farm.

“Thank you,” Wen Desi replied, picking up a porcelain teacup. The little girl smiled and served each of them in turn. Perhaps because such an adorable child was a rare sight, the men’s gazes lingered on her, causing a blush to rise in her cheeks. She quickly retreated.

Wen Desi let out a cold “hmph.”

“That child, Li Quan, is studying at the National School now. She’s very bright. Xiao Zishan wrote her a letter of recommendation, hoping to send her to the Military and Political Academy…” Wu Nanhai whispered, casting a nervous glance around the room.

“The Military and Political Academy? Isn’t she too young?” Wen Desi asked, puzzled by Wu Nanhai’s meaning.

“She won’t be in a few years,” Wu Nanhai’s face reddened, as if he were reluctant to say more. Just then, Ye Yuming began to speak again, and Wu Nanhai fell silent. Ye Yuming was now introducing measures aimed at small farmers and small landlords.

For this group, the Society of Heaven and Earth would primarily promote livestock farming techniques and engage in contract farming, with the Agriculture Committee purchasing all the produce.

This was not as simple as handing out chickens and ducks; it would be structured as a micro-loan program.

“I suggest we entrust this to Delong Grain Company,” Ye Yuming said. “If Delong finds the business too amateurish, it can be delegated to the Agriculture Committee…”

“No problem,” Yan Ming interjected. “Delong is a financial institution at its core. Handling micro-loans is part of our mandate. This is better for accounting purposes.”

He proposed that the loans be disbursed in the form of grain coupons. Borrowers could then use these coupons to purchase a certain number of poultry from the Society of Heaven and Earth. The loan amounts would be small, equivalent to the value of five to ten chickens.

The farmers would buy the chicks from the Society, raise them, and then repay the loan with 20 eggs as principal and interest. The Society of Heaven and Earth would then purchase all the eggs at a fixed price, paid in coupons. When the laying hens grew old, they could be sold to the food factory to be processed into chicken products.

“We can form joint ventures with the local big landlords to open small-scale food processing plants. We provide the technology; they handle the management. The downstream raw materials will be controlled by the Society of Heaven and Earth, and the upstream sales will be controlled by the Commerce Department. Even if the factory belongs to the landlords, they’ll be nothing more than a processing plant, unable to cause any trouble.”

Ye Yuming laid out his plan in a single, confident breath.

“There’s a process issue here,” Wu Nanhai pointed out. “The loan is in coupons, but they repay the farm with eggs. The farm can’t repay the grain company’s loan with eggs, can it?”

“I say we scrap the whole thing,” Wen Desi said. “Let’s not even get into the complexities of comparing in-kind loans with monetary loans. Have you ever seen poverty alleviation in impoverished areas? First, they handed out cash, and the farmers spent it immediately. Then, they switched to giving out chickens, pigs, and sheep. The farmers would take them home and slaughter them for food within a few days, then claim the animals died of disease. What do you do then? Try to collect the debt?” No one could guarantee that the peasants of this era would be any more honest or trustworthy than those of another.

“Instead of a loan, it would be better to structure it as a futures contract. We provide improved breeds for free upfront, then sign a contract to purchase the product at a negotiated price, with a down payment. This way, at least they won’t just eat the poultry. Besides, poultry farming is risky. An outbreak of disease can cause mass deaths, leading to farmers going bankrupt because they can’t repay their debts. That would create resentment, damage our reputation, and affect social stability. Livestock and poultry farming should be put on the back burner. We should focus on popularizing improved crops first.”

“This is a micro-loan. Ten chicks won’t bankrupt anyone, will they? If they all die and the farmer can’t repay, send them to the labor camp for a month to work off the debt,” Ye Yuming countered. “If you’re still worried, we can have the employees’ families raise them first. Besides, if we give them away for free, they’ll just be eaten and claimed to have died of illness anyway.”

“If a farmer believes that the benefit of fulfilling the contract outweighs the pleasure of eating the chicken and drinking the deposit, he’ll do a good job,” Wen Desi shrugged. “Of course, people in long-term poverty-stricken areas don’t think that way. If the people of Lincheng are relatively enterprising, contract farming should be feasible. My main opposition to micro-loans stems from two concerns: first, the local people may not have the concept of borrowing to run a business; second, loans are too easily associated with usury, making them difficult to promote.”

“Regarding the concept of borrowing, Chief Wen, you’re overthinking it. Rural loans not only exist in Lincheng, but their forms are quite diverse,” Yan Ming had done his research. Small-scale borrowing was common in the local countryside, often used to buy fertilizer, tools, or simply to survive the lean seasons. The lenders were typically local landlords and wealthy households, and the loans were primarily in-kind. Interest rates varied wildly, from mutual aid loans organized by local gentry and clans with an annual interest rate of less than 1.5%, to usurious loans with a monthly interest rate of 1%.

“Overall, the peasants do have some awareness of borrowing. If our interest rates are low, they will be willing to borrow. To further mitigate risk, we can establish standards to evaluate clients and implement risk control.” Yan Ming was very interested in agricultural micro-loans. Though a small venture, it would be his first loan business, a start.

“If we do that, we won’t increase the income of the local farmers or win their hearts. The poor will get nothing…”

“We need to find a balance,” Wen Desi said after a moment of thought. “We won’t issue loans to the truly destitute, the dirt-poor peasants. Let’s start with the small independent farmers. We can lower the standards a bit and make the program more widespread to benefit as many people as possible.”