On January 7-8, 2022, the 3rd International Factoring and Supply Chain Finance Conference and the 6th China Commercial Factoring Cooperation Fair were grandly opened. More than 100 well-known industry experts expressed important views and jointly looked forward to the future development trends of the industry in a diversified new environment, so as to pool wisdom and contribute to the development of inclusive finance in the new era for emerging industries of commercial factoring and supply chain finance.

Zhang Jing, Chairman of Qianhai Clearing Commercial Factoring (Shenzhen) Co., Ltd., spoke at the "Focus on Technology Blue Ocean to Help Green Factoring Empower Specialized and New Development Forum". The following is the transcript of the speech, and some content has been deleted or modified. 

Zhang Jing:

Let me briefly introduce our company. Qianhai Clearing Commercial Factoring was established in 2015. Our main clients are core enterprises with a rating of AA+ or above. We issue supply chain ABS, ABN and other supply chain financial products. In terms of technology, we provide some financial technology support to core enterprises and platform trading venues.
What I will mainly share with you today is the application of agricultural industry in supply chain finance and risk control.
At present, the agricultural industry is still relatively small in the entire supply chain. There are some special reasons for this situation. The lack of credit in rural areas and the loss of data in various aspects have made it difficult for supply chain finance to form standardized products in the agricultural sector. However, with the support of the state for the agricultural sector and the support of the "Three Rural Issues" policy, the agricultural sector will have an increasingly large market in supply chain finance.

1. Below we share several business models and talk about the evolution of the agricultural sector in supply chain finance applications.

The first is the farmer joint guarantee model.In the early days, the agricultural sector mainly used the farmer joint guarantee model in the financial supply chain. Farmers are indeed small and scattered entities, with a relatively small number of them. It is not easy to form standardization, and many credit investigation measures are not easy to play a role, forming a farmer joint guarantee model. The farmer joint guarantee model is relatively traditional, so I will not elaborate on it today.

The second is the core enterprise 1+N model. In the later stage, based on the development of the industry, large agricultural industries and agricultural listed companies form a core enterprise, and the credit investigation model for them is commonly known as the 1+N core enterprise credit investigation model, which provides some financial support for upstream and downstream companies based on the credit investigation of the core enterprise itself.

Since the entire credit investigation measures in our country are still somewhat imperfect, it is not easy for our upstream and downstream farmers, agricultural industry dealers and suppliers to form a standardized chain. Therefore, we will adopt a core enterprise 1+N model. First, we will use the credit means of the core enterprise itself to provide some credit investigation measures for its upstream and downstream. The core enterprise can provide support for the relevant trade data of upstream suppliers and downstream dealers. Secondly, since the core enterprise has long-term cooperation with its dealers and suppliers, it can provide a credit endorsement. This model is currently a more conventional model. Many A-share listed companies use this model to finance upstream and downstream in their agricultural sectors.

The third is the platform + data model. This model is widely used on Internet platforms in the agricultural product trading market, such as the Internet platform of the agricultural procurement network, especially the e-commerce platform, because the platform has the data of the entire transaction, and the risk of business logic and the application of business models are controlled through the platform and data. This model can be decentralized and does not require the endorsement of the core enterprise. Instead, the entire transaction flow funds are controlled through transactions on the platform and data is supported.

Fourth, online and offline integration, the Internet + agriculture model . Since the agricultural sector is not easy to form standardization, if it is purely online, it is not easy to form a closed loop of the entire business, so a model of online and offline integration is adopted. This model is more applicable in the industrial agricultural market, because our online is only a transaction. In the entire agricultural sector, in addition to controlling online transactions and trade, we also need to control the entire offline production and circulation and warehousing links. This model should be a major trend in the future. In the use of industrial interconnection and the Internet of Things, the entire business closed loop may be formed in the form of a large interconnection of all things.

2. Let me share with you the industry pain points of supply chain finance in the agricultural sector.

First, agricultural supply chain finance started relatively late in China and is not yet mature in all aspects;

Second , different regions, climates, customs and habits make it difficult for agricultural products to be standardized, so they need to be treated differently when supply chain finance is applied, which requires more manpower and material resources to support them;

Third, the agricultural production cycle is relatively long, and during the production process, market prices may fluctuate greatly, which increases the risk of financial services;

Fourth, there is a lack of rural credit data. These problems pose a great challenge to the formation of financial products.

3. Finally, I would like to share with you the risk control of the agricultural industry in the application of supply chain finance.

The first is the control of business logic. It is necessary to form a complete risk control system before, during and after the loan. Every supply chain finance company has its own system, which is the business operation aspect.

Second, as our country's entire credit reporting system improves and the rural credit reporting system becomes more and more perfect, there may be a better credit risk evaluation system for small farmers.

The third and most important thing is to form a closed-loop management. The closed loop includes a closed loop of logistics and trade flow for the entire industry, and most importantly, a closed loop of funds. Financial services companies can form a closed-loop management through different models and measures. There is a lot of content to this, so I will not share it with you in detail today.

Fourth, we can use local characteristic industries to form a barrier. Because of an industry barrier, the risk of the entire industry will be smaller. With smaller industry risks, the pressure on our supply chain to collect payments will be relatively small.

Fifth, we can obtain the support and cooperation of local governments, especially in some of our major agricultural provinces. The local governments also provide strong support to the agricultural sector. Through the government’s credit endorsement, we can provide financial services and support to the agricultural sector.

The sixth is the financial performance insurance that is commonly used by everyone. At present, some insurance companies have made some new business breakthroughs in the financial performance insurance of the agriculture, rural areas and farmers sectors, including the expansion of performance insurance business through some combinations with science and technology finance, and the ultimate risk is guaranteed through financial performance insurance.

Thank you everyone.