The “Dream-Come-True Bank” was started by Beijing #11 High School students themselves. Students used the operating model of a commercial bank, aside from the fact that they only make loans, and do not take deposits. When students need funding for an activity, want a loan for a project, or meet with personal financial difficulties… behind the scenes can be seen the shadow if this “bank”. But students starting a “bank” has caused concern among many parents, and legal experts think that since most middle school and high school students are not yet adults, they can’t take responsibility for money, so it’s not suitable for them to take part in money lending activities.
High school students start an in-school bank; the largest sum lent is 4000 RMB
“Hi, is this Bank President Han? This is Club Leader Guo, I need to borrow 2000 RMB to cover some expenses.” Both Han and Guo are 2nd year students at #11 High School, where one is a “banker” and one sells stationery. An investor in the VC Stationery Shop Guo runs wants to sell their shares, one of the shop’s locks is broken, and Guo wants to buy new products. For these reasons, she needs some extra funds, so she has turned to “Dream-Come-True Bank” President Han Ming (pseudonym) for help. After Han Ming and the bank’s Vice President come to an agreement, they lend her 2000 RMB with interest of 100 RMB.
“Dream-Come-True Bank”President Han Ming is a student in the sciences section of the #11 High School 2nd year class. No matter which student group or individual needs help with funds, they can call her at any time. She immediately send off a customer manager to take care of the documents. In the past two years, many clubs have relied on this student-run “bank” for “support”. “Storefronts in pine-lined parks, photography lovers, the Byzantium Crew Street Dance Club… we’ve given financial support to them all. The largest loan we’ve given is 4000 RMB.”
“Dream-Come-True Bank” was opened by students at the school themselves, and although they are modeled after a commercial bank, they’re also somewhat different from commercial banks since they only make loans and do not take deposits. When they were first founded in 2012, the school invested 10,000 RMB capital in the “Dream-Come-True Bank”, with all the following operational rules set by the students themselves. The entire history of operation has been based on the trust between the bank and its student customers. Han Ming is the bank’s second president. No matter if it’s students need funding for an activity, wanting a loan for a project, or meeting with personal financial difficulties, this “bank” can provide small low-interest loans.
Single annual interest rate of 5% for low-interest personal loans to students
In making loans, “Dream-Come-True” Bank has a set of rules it uses to avoid risk. The basic process for making a loan is: after a student calls the bank, the bank sets up a meeting with the student immediately –> determining the purpose and size of the loan –> filing out and submitting the application –> risk assessment (ability to repay loan, etc) –> discussing date of repayment, interest, etc. –> drafting of agreement –> signing of agreement (which has three copies, and an explanations of loan terms, interest, and fines) –> release of loan –> periodic inspection of operations and profitability –>repayment of loan. According to President Han Ming, the process for loan risk assessment mainly relies on their analysis of economic factors. They have to take into account the scale of the student group, their methods of making profit, and if it is a non-profit group, their channels for loan repayment. Only after risk assessment do they dare lend money. They also make loans to individuals, and in order to guarantee repayment for these loans, the bank has this year added a personal goods collateral policy. “Recently a student wanted to borrow 300 RMB to buy a new USB drive. We took a portable hard disk as collateral.”
As for the interest rate on loans, the bank decided this year to set an interest rate of 5% for all loans regardless of sum and length. The loan is divided by 12 to determine the monthly loan repayment. If the loan is for 1000 RMB, one year’s interest is 50 RMB, and half a year is 25 RMB.
Bankers take 40% of interest on each loan as a bonus
According to Han Ming, the bank has never had a student fail to repay a loan. Apparently, although the contracts the bank signs with students are not legally binding, but one of the three copies of this agreement goes to the school for safekeeping, and every year the school inspects the accounts of the “bank”.
Han Ming says that the operational situation of the bank is currently good, and that it has been consistently profitable. There are 24 people working for the bank, including the president, the vice president, one finance department worker, and three customer managers. For every loan they make, 40% of the interest is taken as bonuses.
Not all students at #11 High School shared the same opinions about the “Dream-Come-True Bank”. Some students felt that those of their age should be building a base in cultural knowledge, and not in making a profit through “banking”. Also, if there happens to be a dispute, students have no way to control it themselves. Supporters felt that its very difficult for them to find money to borrow outside of the school, and that it’s not easy to get all the necessary qualifications, so the student “bank” is a big convenience to them.
Expert: A “bank” in a high school is unthinkable, students shouldn’t be overexposed to economic profit
Interviewee: Chen Weidong, China Youth Research Center, Youth Law Research Institute Researcher
Beijing Youth News: How do you view this student “bank” club activity?
Chen Weidong: It’s just unthinkable that high school students are doing this. If this were just an exercise exercise conducted by the school, with a virtual environment for the students to work in and not conducting real operations, I think that’d be ok. But if it’s really operating and making a profit, I think it’s really not suitable for high school students.
Beijing Youth News: Why isn’t it suitable? What isn’t suitable about it?
Chen Weidong: This is a question of their status [as high school students] and their nature of their actions. Most high school students are not adults, and they have no ability to be responsible for money, so this isn’t suitable for them. Although there are such practicums in western schools, the laws for minors in those countries are very systematized, and are relatively strict. Most of the laws in our country regarding minors have to do with questions of protection. We don’t have much law focused on misconduct, and we don’t have such detailed rules and regulations.
Beijing Youth News: Is it legal for students to give one another loans?
Chen Weidong: Our country’s school management [rules] still do not address this issue, and still do not have a clear definition of statutory misconduct. Western countries categorize smoking among minors as illegal, this is a statutory offense, and our country still doesn’t have such things.
Beijing Youth News: The school’s original intention was to let the students strengthen their practical experiences through “real-world training”. That’s not ok?
Chen Weidong: The intention of the school is good, but it’s not only through such “real-world training” that the students can get practice. For example, the school could set up mock courts, and students could get real experience by taking on these roles. The school could also get in touch with external commercial organizations and set up an educational base. But to let students themselves set up business and make profits, it’s really just not ok.
School: We did it to encourage their future development in business
Some parents pointed out that students in high school should mainly be building the fundamentals of their knowledge, that it’s not suitable for high school students to be involved in money making student activities, and that the school should not encourage students to open a “bank”. Regarding this, the teacher who oversees economics focused clubs at the #11 High School explained that the “Dream-Come-True Bank” and other such clubs are supported and developed in order to encourage the future development of the students in business, “There are some who might want to do things related to economics in the future. The school is helping them by providing an environment and resources, building a small-scale society, and giving them a chance to get practice.”
What if the students don’t pay back the “student bank”? According to the school, there has never been a repayment issue
Does the school have any special management and oversight in order to avoid risk among the economics-focused clubs? One teacher responsible for clubs at the school said that the school checks club reports every year. “We have a double checking system with the student council. If there are any problems with the economics-focused clubs, like if there are suddenly huge profits, the students will let us know, and we’ll intervene. ” Since the bank deals with lending cash to students, wouldn’t it be easy for a repayment issue to occur? The teacher told reporters, “We haven’t had any such situation during the past few years. The students are responsible for profits and losses, and they take great responsibility for their own operations. They need a good reputation and public praise, not any kind of questionably big profits, in order to continue to grow their business.”
Is it legal for students to start a “bank” in a school? The school has not considered this question
In the course of our reporting, some students and parents wondered: is it in accordance with the law for students to open a “bank” and make real loans? As for this, a #11 High School teacher said that the school has not considered the question. In reality, the “Dream-Come-True Bank” is just a student group, and its focus is not to make profit. Furthermore, since the students are all quite innocent, there has never been a problem in the several years of the club. In the end, they all have to focus on the gaokao anyway, so of course they have to put their studies first.
Date of publcation: 11/15/2013