ABSTRACT
The Hutubi Model In 1992, China introduced a rural retirement-insurance programme for farmers. One of the first asset-building initiatives in rural China, this voluntary programme allowed participants to contribute to their individual retirement savings accounts, which would begin remitting annuity payouts when the participant reached the age of 60 years. The policy required low individual contributions and encouraged collective contributions (by villages and village enterprises), though collective contributions were rare. Within a few years of implementation, the programme was unable to attract new participants or to retain existing ones. Although well intentioned, the programme seemed to offer participants little more than a retirement savings account. Fearing inflation, farmers became reluctant to accumulate savings in an account they could not access for decades to come. The Hutubi Rural Retirement Insurance Office responded by initiating a loan programme in the local area. The programme allowed rural retirement-insurance participants to use their own and other participants’ retirement-insurance registration cards as legal collateral for loans. Introduced in 1998, the loan programme was suspended during the following three years due to questions about its legitimacy, but finally was endorsed by the county government in 2002. One of this study’s co-authors, Xincai Guo, headed the Hutubi Rural Retirement Insurance Office and launched the initiative. This initiative involved close co-operation between the office and local banks. A participant seeking a loan surrendered the retirement-insurance registration card (indicating ownership of the retirement savings account) to the administration office. In exchange, the office gave the participant a notice that specified the amount he or she intended to borrow, and then the participant took the notice to a partnering bank (e.g. the rural credit co-operatives or the Bank of Agriculture). In applying for a loan, the participant gave the lender the notice and took out a loan in the amount indicated by the notice. When the borrower retired the debt, the bank issued a notice to him or her. The participant then returned to the administration office and exchanged the bank’s notice for the account registration card. The interest rate charged for the loan was the same as that for a bank loan. The loan term varied from three months to three years. If the participant did not repay the loan on schedule, the bank imposed a punitive interest rate. (For a detailed description of the loan process, see Guo et al. 2008 ‘Asset-Based Policy in Rural China’). The Hutubi Model was immediately welcomed by local farmers (Guo et al. 2008 ‘Dual Incentives and Dual Asset Building’; Guo et al. 2008 ‘Asset-Based Policy in Rural China’; Zou 2010; Zou and Sherraden 2009). As of 2006, the Hutubi Model accounted for nearly 1300 loans worth CNY 7.5 million (Guo et al. 2008 ‘Asset-Based Policy in Rural China’). Because access to financial
services was limited in rural areas, farmers benefited greatly from this policy innovation. The administrative, survey, and in-depth interview data on the Hutubi Model show that a large majority of participants took out the loans to purchase physical assets for agricultural or pastoral production. Most borrowers used the loans to buy farming supplies such as seeds and fertilizer. Some used them to buy livestock, electrical farming equipment, or transportation (e.g. a truck); others invested in education or a small business (Guo et al. 2008 ‘AssetBased Policy in Rural China’). Retirement-insurance administrators also deemed the Hutubi Model a success. Although the central government suspended the national retirement-insurance programme in 1998 and participants in many other places dropped out, enrolment in the Hutubi programme remained steady at 8600 for its duration (1998-2010). The insurance fund in the Hutubi programme grew from CNY 170 million in 1998 to CNY 245 million in 2006, and the average annual growth rate of 8.13 per cent far exceeds the 5 per cent rate promised by the government. During the same period, the average savings in each account increased by 57 per cent, from CNY 1798 to CNY 2827 (Hutubi County Retirement Social Insurance Office 2007). Inspired by the Hutubi Model and a central government directive that encouraged exploration of rural retirement social-insurance systems, governments in the provinces of Sichuan, Jiangxi, Inner Mongolia, and Anhui proposed assetbased retirement social insurance initiatives like the Hutubi Model (Chinese National Development and Reform Commission 2007). In 2006, the Sichuan Tongjiang County Bureau of Rural Social Insurance implemented a retirementinsurance programme for all citizens in its 49 towns. The programme was open to all county residents from newborns to those aged 59. The programme especially welcomed participation of those who lost farm land, worked in cities outside the county, served in the village governments, or followed the national family-planning policy (Tongjiang County Bureau of Rural Social Insurance in Sichuan Province 2007).1 Like the Hutubi programme, the Tongjiang programme allowed participants to use their retirement-insurance registration cards as collateral for loans. In Tongjiang, borrowers obtained the loans from the rural credit co-operatives for up to 70-80 per cent of the funds in their accounts. They used the loans for health care, children’s education, and home repair. The term for all loans was one year, and the programme required borrowers to repay the lending agency by the due date (Tongjiang County Bureau of Rural Social Insurance in Sichuan Province 2007). Despite the success of the Hutubi Model, it came to an end in 2010. The implementation of the new rural retirement-insurance programme eliminated the policy platform that enabled the Hutubi loan programme. In response to the new policy, the Hutubi government terminated the loan programme, and the Hutubi retirement-insurance programme joined the larger insurance pool operated by the government of the Xinjiang Uygur Autonomous Region. Previous studies detail the operation, features, and successes of the Hutubi programme (Guo et al. 2008 ‘Dual Incentives and Dual Asset Building’; Guo
et al. 2008 ‘Asset-Based Policy in Rural China’; Zou and Sherraden 2009). Below we discuss the programme characteristics as they pertain to lifelong Individual Development Accounts, which have drawn attention from policymakers, practitioners, and researchers worldwide.
