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Crossing the Last Mile

How one company empowers rural China by bringing banks to villages

Volume 2, 2019

By Lilly Zhang

Wang Jubing (EMBA2018), founder and CEO of Yinong Technology, rarely makes public appearances. Although the rural service provider he founded was valued at US$200 million in 2015, Wang would rather devote his time to villages than promotional events or media exposure. In the past 11 years, he has visited over 1,200 villages in China, and he likes to go by his nickname: Village Mayor Wang.

In 2008, Wang left the financial institution he had worked with for several years and started his own business, Xianglin Centre. To date, his comprehensive rural service network has opened in 20,000 villages in 16 Chinese provinces and autonomous regions, bringing services like rural finance and e-commerce to farmers, building them paths to wealth. The English translation of the company’s name is Village Neighbour, an apt description of how it builds on relationships and brings people together. 

A pragmatist who likes to keep a low profile, Wang is committed to making villages a better place. “Since I started my rural entrepreneurship, I’ve never thought about quitting, as this project not only allows me to realize my professional dreams, but also helps me fulfil my sense of personal honour and responsibility,” the 49-year-old tells TheLINK.

Rural experiment

Wang was born in a nondescript village in Hebei Province in North China. Like many rural teenagers who went to study in urban areas, he lived and worked in the city after graduation. Nevertheless, he has continued to maintain his deep roots in rural China. “My affection for Chinese villages is bone-deep. While I enjoyed the benefits of China’s rapid urban development, I have a clear understanding of the gaps between its urban and rural areas,” he says.

Among these gaps, Wang was most struck by the limited access to banking available in rural areas. In many parts of China, villagers often had to travel dozens of kilometres to counties that had banks, and when they arrived these banks were often closed. In addition, due to the lack of credit data, most banks wouldn’t give loans to farmers. To make matters even worse, the lack of legal financial institutions gave rise to illicit ones which sometimes fleeced farmers of their savings.

“China’s rural areas were almost devoid of modern services. Not only were banks lacking, even Rural Credit Cooperatives, which position themselves as rural financial institutions, could only penetrate into counties and towns, not villages. A lot of farmers couldn’t access basic financial services like saving and withdrawing money,” Wang says.

However he didn’t just see the challenges, but also opportunities. He wanted to use modern technology to bring banks to rural areas. 

“I’ve always believed that business is the most powerful force in today’s age. So I thought about a sustainable way, using the power of business, to solve rural issues,” he explains.

He began by testing the waters. In the first stage of his entrepreneurship, he launched what he called “rural experiments” in Hebei and Shandong provinces. By partnering with banks, he issued debit cards to every household in pilot villages where passbooks, obsolete in Chinese cities, still prevailed. At the same time, by leveraging IT services, villagers were able to withdraw, save and check their balances using POS (point of sale) machines located in each village, saving them trips to banks.

The experiment turned out to be a success and also won the approval of banks. But promoting this model required the support of China’s financial authorities. Wang was encouraged, in 2011, when China’s central bank issued a notice on the nationwide establishment of bank card service points in rural areas. This document provided policy support for his rural experiment. In the following years, the State Council and the Banking Regulatory Commission issued documents that further paved the way for inclusive finance in rural areas.

From “one to N”

Having solved the “zero to one” problem, Wang’s next challenge was to take this business model to more areas. In 2013, he established Yinong Technology and started to focus on the establishment and promotion of Xianglin Centres across China, at the same time introducing more products and services.

As a rural service point authorized by the central bank and through cooperation with 20 commercial banks (including Bank of China, China Construction Bank, Industrial and Commercial Bank of China, Ping An Bank, Huaxia Bank, Minsheng Bank, Huishang Bank and Zhongyuan Bank) Xianglin Centres — which operate like a franchise — allow villagers to withdraw funds and do transactions without having to leave their villages. It also provides assistance to villagers who can’t shop online, acts as a logistics hub for online shopping, and offers services such as bill payment. The managers of each centre take on many roles including Yinong’s ambassador, representative and business partner, and their source of income comes mainly from commission.

With so many roles rolled into one, the centres’ choice of venues and managers became critical in Yinong’s quest to conquer the rural market. In the beginning, Wang naturally thought of using village stores as venues, and their owners as managers, as each village has a store that could be a central hub for people, information and logistics. But he soon realized that a successful manager has to be a capable individual who is willing to try new things and dedicate himself to providing a certain level of service. Village stores weren’t the best choice.

“Villages are ‘a society of acquaintances’ where families and heritage play a vital role. It’s a different society from the cities and if you do business in rural China using urban logic, it won’t work out,” he explains.

Once he realised this, Wang changed his strategy. As villagers are the heart of each village, he opened Xianglin Centres in their homes. Whenever he enters a village, Yinong interviews villagers who wish to join the franchise and select those who have a high school education, a good reputation and a passion to join his team. To improve their skills, Yinong established its own training department, Expedition College, which provides training through video calls or village lectures, empowering participants to be capable of serving their village.

“Our goal is to ‘bring change to a person, wealth to a family, and prosperity to a village’. In every village we go, we teach a farmer to serve his village by himself, rather than by us or our partners,” Wang says.

Over time, the success rate of recruiting managers skyrocketed from 20 percent to over 90 percent. Now the average annual income of managers who have been with the team for over a year is RMB38,000, with a 50 percent increase each year. “We’ve basically achieved our goal of bringing wealth to a family. The most difficult thing is bringing prosperity to villages, which is a long journey,” he adds.

Nobel peace prize winner and Bangladeshi social entrepreneur Muhammad Yunus once said that women in rural areas are the most motivated to change their current status. Interestingly, among Xianglin’s more successful managers, over 65 percent are women. “In rural areas, there’s a saying that one good wife will bring prosperity to three generations of her offspring. Women are the heart of a family and are especially important in Chinese villages. They are good service providers and have very high risk awareness. Therefore we recruited large numbers of female managers and people joke that I’m a role model for middle-aged and senior women,” he laughs.

From Liaoning in Northeast China to Guangdong in South China, Yinong has spread its tentacles to 20,000 villages in 16 Chinese provinces and autonomous regions and brought services to over 10 million households, making it a grass-root force in China’s rural revitalization. The company has profited for six consecutive years.

With the support of these centres, Yinong started to provide credit scoring for farmers. “Rural China is a ‘society of acquaintances’ with a high level of transparency, where each household’s info such as family members and main source of income is no secret,” he says. Xianglin Centres paint credit portraits of each household and whenever a farmer needs a loan, the centre will provide this data to banks as a reference. In the past three years, Xianglin has facilitated a total of RMB80 million in small loans, providing support for villagers who want to start their own businesses.

In recent years, Yinong has introduced labour recruitment and land management services to the centres, and developed an app that empowers rural China by providing easy access to various services. 

Serving rural markets

In 2015, when internet giants like Alibaba, JD and a handful of finance companies just started to enter the rural e-commerce and finance market, Yinong Technology — which had already been in the market for seven years — raised RMB200 million in series A funding from Vision Knight Capital and other institutions.

Looking back, Wang says, “There’s no shortcut in conquering China’s rural market, nor have we taken any. Every centre we opened was built brick by brick. For each centre’s opening, we need to visit a village more than 20 times, and each month after that we visit twice. The mileage on our staff members’ cars is close to that of taxis.”

As China’s urban market becomes saturated, lower-tier cities and rural areas are becoming a hot market for businesses. Wang admits that competition is rising, but he is open to it. “With the advancement of the internet and other technologies, it is inevitable that villages will become more prosperous. But this prosperity will require hundreds of companies entering the market rather than one company alone. There is still room for more competition,” he says.

As a frontrunner in the rural market, Wang is constantly thinking about how to make Yinong a better company. This reminds him of CEIBS, his alma mater. Six years ago, Wang joined a small club of seven entrepreneurs, among which five are CEIBS alumni. In 2017, he met Xu Xiaonian, now Honorary Professor at CEIBS, who follows rural development closely and has visited Yinong twice.

As he interacted with CEIBS alumni and Professor Xu, Wang felt an emotional connection. This bond, coupled with the fact that he had more management questions as his company expanded, led him to enrol in CEIBS EMBA programme in 2018, hoping to find solutions and help his company grow.

At CEIBS, Wang networks with classmates who are all industry professionals with updated knowledge on business management. But what’s even more important, he says, is the chance to hone his own independent thinking. “The others might give you inspiration, but you will receive more fruitful outcome if you think more,” he says.