The Rabobank Group and the International Finance Corporation (IFC) have signed a landmark deal with a Chinese bank on equity investment, making them the first overseas investors in a Chinese rural cooperative bank.

Under the deal signed between the Dutch bank, the IFC and the United Rural Cooperative Bank of Hangzhou (URCB), Rabobank acquired a 10-percent stake in the Chinese bank while IFC secured five percent, said an IFC statement.

The deal marked the first foreign equity participation in a Chinese rural cooperative bank, IFC said.

The deal was signed by Bert Heemskerk, chairman of the Rabobank Group (Rabobank), Karin Finkelston, associate director of the IFC East Asia and Pacific Department, and Zhang Chen, chairman of the URCB in Hangzhou, capital of Zhejiang Province.

The IFC, part of the World Bank Group, said it constituted a major step in initiating the next phase of the IFC's financial sector strategy in China, which had focused on restructuring and reforming city commercial banks.

In addition to the financial investment in the URCB, Rabobank will provide management and technical support to help further restructure and modernize URCB.

Rabobank and the IFC would also initiate technical assistance programs to advise the bank in a range of areas including strengthening the administration and management, business development, distribution policy, marketing, credit control, risk management and IT systems development.

Rabobank will send a senior staff member to the management of the URCB to help execute the technical assistance program and in partnership with the IFC will advise the Chinese authorities on rural cooperative reforms in Zhejiang Province.

The IFC would place on the bank's board a senior banker with extensive China and international banking experience who would guide the bank's management as it developed into a modern, and sophisticated financial institution, it said.

IFC executive vice president Lars Thunell said reforming the rural credit cooperative system had a profound impact on rural development and poverty alleviation in China.

Zhang Chen, chairman of the URCB, said his bank hoped to further improve its corporate governance, introduce advanced managerial skills and enhance its competitiveness through the deal.

Chinese rural credit cooperatives were set up in the 1950s and are in most instances the only credit providers in rural areas. The government has been trying to develop the credit cooperatives into fully-fledged banks.

The URCB, a joint-stock cooperative financial institution focusing on local communities, was based on the Hangzhou Rural Cooperative Union together with 23 rural credit cooperatives under its control.

Source: Xinhua