This Honest Inquiry Interview features our GLP project partner Founder and Chair of Puhan Cooperative, Madame Zheng Bing.
A conversation with Zheng Bing
Madame Zheng was a primary school teacher in Zhaizhi village, Puzhou township, Yongji, Shanxi Province in China before she started organising farmers training in 1998 and subsequently founded the Puhan Cooperative.
Madame Zheng deeply believes in the intrinsic value of rural communities. Under her leadership, Puhan developed into a service oriented multi-functional cooperative with a strong focus on rural regeneration to create liveable villages. Puhan currently has 2,700 household members across Puzhou and Hanyang townships.
It has been due to her strong leadership and vision that Madame Zheng was voted as one of the top 10 rural entrepreneurs in China in 2008.
Leading the development of Puhan's Cooperative
We know Puhan has been recognised for its great success, due to your leadership and vision. What led you to found Puhan Cooperative?
In 1998, we stumbled upon some perplexing issues. We had a few thousand hectares of land in this area. The government was promoting large-scale mono-cropping to improve farmers’ lives. However, the technical support was inadequate. Farmers were getting their advice from merchants selling farming inputs such as fertilisers and pesticides for advice. Chemicals were overused, causing severe pollution and health issues. So, at that time we realised that we need to organise farmers’ training and start providing technical support ourselves.
From 1999 to 2001, technical training was our core service. By 2001, we understood that focusing solely on technical training would create more problems. Everyone was exhausted by just concentrating on production.
Therefore, in July 2001, we began organising dancing activities for women. We persisted for a month, and 80 percent of the village women joined us. By 2004, over a thousand women from 43 villages came together. It made us realise that there was an enormous amount of energy hidden in this group of women. Our village life was enriched with dancing.
We found it was very easy to get things done when we came together. We formed a few cooperatives differentiated by products in 2007 when China promulgated the Professional Cooperative Law. By 2012 we brought the different cooperatives together to form a cooperative federation. Seeking to improve the quality of life was our primary goal as a cooperative. We started to explore how to restore an ecological way of life in the countryside.
Puhan Cooperative's work is very much aligned to the Central Government's strategy on eradicating poverty and promoting rural revitalisation. What is your view on this strategy and more generally about the quality of life in the countryside?
I am very happy that I have been living in the countryside, as we always feel that life in the country is one with nature. At the same time, agricultural production is an integral part of our lives and we value the opportunity to live with our family, including the elderly and the children happily under one roof.
We have been doing rural development work for twenty years and are grateful to have national policies that supported us - the 2006 “new socialist countryside” policy, the 2007 professional cooperative law and in 2017 the “rural revitalisation strategy” which was proposed.
We believe more and more people are giving increased attention to rural villages in China and the implementation of the revitalisation strategy. There are many possible paths, and we believe that promoting cooperative organisations for farmers is a very important one.
Many of our readers come from the business sector, managing large organisations and leading teams. As you know our leadership development programmes serve primarily corporate leaders, though we also welcome government and civil sector participants. What makes a cooperative different from a company and in your opinion what are its key success factors?
A cooperative is a union of people. In addition to providing products and services to external customers like what a company would do, a cooperative also delivers supporting services for the community and facilitates exchange of products and services among its members by leveraging close neighbor relationships in rural villages.
Cost is a very important factor for a business and we believe the cooperative structure offers the advantage of having the lowest cost base. For example, our cooperative has 30,000 mu (approximately 2,000 hectares) of land owned by 2,700 households. If this were managed by a company, just the leasing of the land alone would be a prohibitive cost. The labour involved would also be hard to estimate. I believe many large and small farms have and continue to experience this difficulty.
The process of organising a cooperative involves bringing different people and opinions together. The more people we have the more opinions we have. A democratic system is fundamental to a cooperative. We believe in respecting each other’s arguments while trying to achieve a common path forward.
When we cannot agree, we have two options. The first is “the minority obey the majority”. If it still does not work, we will leave it till later. Thus in our village, we have always emphasised that good work is done slowly. And when we do achieve results, everyone benefits together. If we do not do well, we share the risk together.
We know that you and your team place great emphasis on the non-financial goals of the cooperative, including the social services and the overall quality of life within the community. What are the major services that are offered by Puhan Cooperative to your members and how do these enable you to achieve your objectives?
Our cooperative federation has nine major services: group purchase of household goods and farming inputs, consolidated sales of agricultural produce, microcredit, elderly services, childhood education, production of handicrafts, technical training and crop protection.
Through group purchase of household goods, we can ensure the high quality of products and guide our members to consume consciously. We also do group purchase of organic food and organic fertilisers and some of these can be done through exchanges among our members. In addition, we collectively sell our agricultural produce to the market.
Microcredit is also one of our key services. Everyone says smallholder farmers are not trustworthy, but in our cooperative, farmers are the most honest. We don’t request collateral or guarantee when giving out microcredit for crop production or small-scale animal husbandry. Our microcredit ranges from RMB 2,000 to 30,000 and members can apply for a loan anytime they have a need. We see this as an opportunity to build trust with our members.
The revenue from our services is between RMB 80 and 90 million. Our staff spend 80 percent of their time in farmers’ homes and the fields. Without the emotional bond that is formed with our members, we believe there can be no trustworthiness. If our 2,700 families do not get active, we cannot count on our staff to do much.
We are not seeking profit maximization. What we are pursuing is for the lives of our members to become more comfortable. Our annual profit is between 2 to 3 million. We set aside 25 percent for charity, 60 percent as members’ dividend and the rest for staff’s benefit and capital accumulation. We have the confidence to become better each year.
How does the cooperative manage the financial risk and possibility of accumulating bad debts associated with offering microcredit?
We try to guide our members towards responsible consumption and we work to identify real needs while disbursing loans. For example, if a member wants to borrow RMB 20,000, and we determine that the actual need is only RMB 10,000, we will not lend the requested RMB 20,000. We will encourage the member to borrow less.
Our interest rates go up according to the amount borrowed. A loan of RMB 2,000 or below is offered interest free. 2,000-5000 is offered with 0.5% interest per month, 5,000-10,000 is 0.8% per month, 10,000-20,000 is 1.3% per month and 20,000-30,000 is 1.5% per month. This is the inverse of how commercial money lending is managed and we do it this way in order to protect our members - if we were a commercial lender without an interest in our members' well-being we could charge more interest and possibly make more money.
From 2012 till now, we have given out a total of RMB 35 million in microcredit loans each year. Over five years, there have been only 27 households who could not repay, and each has a different reason. For example, one died in an accident. In this case, we first went to comfort their family and support them with follow-up services. Eventually the loan was paid up with our risk management fund.
In another example, a member who applied for loan told us he had cancer and might not be able to live more than three months. He wanted to use the loan to lease 10 mu of farmland for his family. We discussed and finally decided that since he has the courage and honesty to tell us his actual situation, we would give him the loan. We did worry about the risk if he passed away in three months. To our surprise, his wife repaid the loan within a week after he died three months later. We feel that the purpose of making micro-loans is to a certain degree the process of building trust between people and not a simple lending business.
In building a self-sustaining farm-to-table value chain, how does Puhan Cooperative interact with urban consumers and develop its market?
We found out three years ago that among our 2,700 members, over a thousand households have family members living in Yongji and Yuncheng, two nearby cities. We feel we can serve their daily needs, so we started a consumer cooperative. Rather than buying beautifully packaged food from the supermarket, our consumer members can get their daily staple food such as noodles, flour, cooking oil and vegetables directly from the land. In the past three years, we believe we have made a significant accomplishment – we are leading urban consumers to reconnect with the countryside and consume higher quality food while also consuming less overall.
What are your views on the importance of developing people in rural areas?
Rural revitalisation requires talent. In rural villages, we feel that the elderly amongst our community are our main asset. They carry the knowledge and experience from two to three generations. We also feel that the young generation are our hope. Our children enjoy their opportunity to grow up amongst nature, and the countryside offers a natural classroom. Our national policy is also pushing for education reform. It is necessary to cultivate young talent to become the main force of rural revitalisation. We do not oppose young people going to city, but we believe most of them do not enjoy the factory work.
Our cooperative now has over 60 young people and more and more of them are gradually returning. They enjoy nature and they have embraced the entrepreneurial passion in seeking to realise their dreams. Throughout the process of bringing up our younger staff, we have been deeply touched by their display of vigour and we believe this is more akin to the ideal of life with inter-generational collaboration. We can earn a profit in agriculture, but our work also carries important ecological and educational functions.
We know that it is a sad reality that in general, many people within Chinese society do not have a great deal of trust in others. Yet trust is a fundamental element to a healthy community and a fulfilling life, not just in the rural areas but in the cities, and in our workplaces. How do you promote greater trust among the 2,700 families within your cooperative?
In rural society, everyone in the village know each other well. People frequently chat with each other on common topics and this forms a natural and constructive friendliness within the community. The members of the community are able to see what we do and through the process of "word of mouth" the results of our work has always been out in the open to see.
However throughout this process, we know that misunderstandings will always arise from time to time. When this has happened in the past we did not try to explain or justify our decisions. We just kept ourselves fully engrossed in our work, remained focused on creating benefit for the community, and gradually our team has been recognised by everyone based on our positive results.
We have learned a lot about the challenges China is facing in producing safe, high quality food in a way which does not further degrade the land. Can you share with us a bit more about how you envision the development of sustainable agriculture and circular farming in Puhan and in China in general?
We feel guarding this land of few thousand hectares requires the effort of not just the few of us but all of our 2,700 families. We also believe in diversifying our crops and embracing biodiversity rather than simply pursuing large scale mono-cropping. These few thousand hectares of land must support crops suited to the local environment and this includes wheat, cotton, beans and fruits.
We need to consider how to integrate crop production with animal husbandry. We have been running a pilot on ecological livestock farming in the past year and we hope to integrate crop-livestock circular farming.
Lastly, we appreciate the microclimate formed with the interaction of the Zhongtiao Mountain on our East and the Yellow River on our West, and we hope to live and work in a way which is congruent with this natural cycle.
What makes Puhan so different from other Chinese farming cooperatives?
Most other cooperatives focus primarily on economic development. We focus more on bringing people together and transforming how people look at things. The core of our work is mainly in this area.
Community organisation is fundamental to bringing about the intrinsic values of rural communities and restoring rural vibrancy. Cooperation among smallholder farmers goes beyond agricultural production. Mutual support in daily living and the delivery of public services goes a long way in building community cohesion which in turn enhances cooperation in agricultural production.
What do you see is the next phase of development for Puhan Cooperative?
Beginning last year, the new cooperative law allows cooperatives to establish companies under them. We believe this is an opportunity but also a challenge. We would like to explore how to organise a company to develop downstream processing for our produce and expand our sales channels, including working with other companies to develop vertically integrated value chain. This would support our objective to create more value and less wastage for our products, especially the perishable fruits.
We hope you have enjoyed this interview with Madame Zheng and learning just a bit about her important work and unique perspective on life and community in China. We believe that much of her knowledge and wisdom is transferable across backgrounds and to others who are leading teams or working to realise collective goals.
Too often we make assumptions about what is relevant or not relevant to our work and our daily life, assuming for example, that the gap between the respective experiences of farmers, business people or civil servants may be too great to bridge.
Through GIFT's original approach to experiential leadership learning we work to promote cross-sectoral learning and to build bridges of understanding and friendship between high potential business managers and those who are actively addressing challenges and creating social value in countries across the region.
Click here to read more about our upcoming Global Leaders Programme (GLP) in partnership with Madame Zheng and the Puhan Cooperative, 22 Oct - 2 Nov, 2018.
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