Cover of the inaugural issue (May 5) of the biweekly magazine in which this article was published

A loan might be more useful than donations to lift a town hit hard by the devastating Sichuan earthquake out of poverty.

He Zhiyi, associate dean of Antai School of Management at Shanghai Jiaotong University, visited the disaster area soon after the tragedy in May of last year.

In the course of a sleepless night there, he was hit by a question: School rebuilding can be funded by the government, but what about rural homes that collapsed in the earthquake? Is there a solution to unite the government, banks, survivors and the public to help those whose homes were destroyed?

He pointed to Fangbei, a remote village that received no public attention after the disaster. About 27 kilometers away from the city of Mianyang, the village saw the destruction of 95 percent of its houses, which held 435 families. The entire village was nearly wiped out.

He had an idea: to copy the model of Muhammad Yunus, the Bangladeshi Nobel laureate, for “banking to the poor.”

To help the survivors, in addition to common relief solutions from the government and the banks, He made it possible for villages to acquire zero-interest loans from individuals willing to offer a helping hand.

Donations are a deep hole. But loans can motivate villagers, and give them dignity. If successful, the free loan model can be replicated in other poor areas.

He explained Yunus’ vision to Fangbei villagers: “When Yunus lent the money to the poor, 98 percent was paid back. You represent the credit of Chinese farmers.”

To rebuild a 60 square meters home, the village would receive a 10,000 yuan ($1,465) zero-interest loan. Eventually 218 families joined the program.

To secure the 3.45 million yuan ($505,509) loan needed to start the program, He launched a media campaign back in Beijing. He turned to his personal friends and his former students, many of whom are now executives, to open their wallets.

Not everybody was convinced. Finally, a 1.49 million yuan ($218,319) loan was received. By early spring this year, survivors started moving into new homes funded by He’s program.

But the program can’t be called a success until at least 40 percent of the loan is paid back by the end of next year.

According to statistics, over 320,000 people in China have personal wealth over 10 million yuan ($1.47 million). He believes that the loan model of Fangbei village is an example of the best way to connect the rich and the poor.

(China Weekly Magazine)