student bankThe “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



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loansHow to Clean Up the Ten Billion in Debt?

On January 28th at the end of the eleventh Guangdong Province CPPCC meeting, the Guangdong branch of the China Association for Promoting Democracy submitted a report to the general assembly  pointing out that up to 2012, fifty publicly administered institutions of higher education in Guangdong had amassed debt totaling 9.869 billion RMB, with interest payments to banks of 700 million per year.

According to the Ministry of Finance and the Ministry of Education’s promulgation of Regarding  the Alleviation of Debt Burdens of Regional Colleges & Universities: Opinions on Resolving Higher Education Debt Risk, schools are the main bodies responsible for debt. So, do these schools have the ability to repay the debts? If not, who should be responsible for paying the debt for them?


Expansion-related woes or not enough investment?

One school has complained that after spending 300 million to begin development of a new campus, banks tightened up and would not continue to provide the necessary 200-300 million more necessary to complete construction. The school says construction on the new campus area has been halted against their will for over a year, and they still must pay the bank over 20 million RMB per year. In fact, this embarrassing situation at Guangdong University of Education is currently common among provincial-level schools in Guangdong. Since 2008, Guangdong area schools have taken out many new loans needed for expansion, and by June of 2011, many provincial-level schools had borrowed various sums ranging from 300 to 500 million RMB.

Why are all these schools in debt? From one perspective, it because of expansion. Professor Chen Jian of Guangdong University of Education, one of the writers of the report at the Guangdong Province CPPCC meeting, indicated that the schools all have standards for expansion set by the province. Total campus populations for the province’s full-scale universities and colleges increased from 220 thousand in 1999 to 1.527 million in 2011.

Every new student requires a new bed, space in laboratories, desks and chairs, and related equipment for experiments, facilities, and more. If the number of people increases, then new buildings, cafeterias, roads, gymnasiums, and other necessary basic academic infrastructure must be built.

Schools also have their own reasons for expansion. Reporters were told by the dean of a relatively small provincial-level institute that the only way to increase revenues and alleviate the capital issues is to take out loans for expansion and increase student numbers, then through increased tuitions slowly pay back loans.

The way vice-dean of Guangdong Institute of Education Huang Wei sees it, Guangdong schools have such a heavy debt burden because of insufficient appropriation of funding. According to national requirements, the per-student allocation of funds should be no lower than 12 thousand RMB. Although Guangdong province set up a pre-2013 province-wide 12,000 RMB student fund average allocation goal (excluding Shenzhen), the actual average allocation came to 7,600 per student, with 4,400 per student going to dedicated capital funding. This capital funding is generally distributed through the Guangdong Department of Education, and goes mostly to institutes under the control of Guangdong provincial ministries and committees, as well as “211 Project” schools.


Expose the Government to Debt or Make Schools Responsible?

How can the debt crisis be resolved? According to the aforementioned opinions of the Ministry of Finance and Ministry of Education, as the main body responsible for repayment of the debts, schools should operate under the principle of “loan taker is loan payer”.  The funds for repayment should be provided by the schools, with the government providing support and assistance.

Although the opinions of the two government bodies are very clear, there are still a variety of different opinions. The report submitted by the Guangdong branch of the China Association for Promoting Democracy suggests investigating school leaders for erratic and irresponsible operations, but should also take the actual situation of schools into account and give support to those schools that truly lack the ability to repay loans. As for reasonable loans, such as ones that were used for infrastructural development, the government should take full responsibility, and if schools have already paid a portion of the principal and interest, the provincial government should return these funds. At the same time, while investigating the scale of capital investment at key and non-key schools, the government should emphasize the assistance of regular institutions of higher education.

Liu Huijian, dean of the Guangdong Institute of  Science and Technology, suggested that Guangdong learn from the methods of other provinces, and use a one-time public funding unified financial appropriations plan to clear the books of the nearly ten billion in debt.

Reporters learned from the Ministry of Education that Guangdong has not required nor implemented the 4% GDP standard, but will increase educational funding yearly until it reaches 25% of the budget. Sun Yat Sen University Vice Dean of Operations Xu Jiarui said that this method of setting the growth rate is not as rigorous as using GDP. From his perspective, the key to resolving university debts is still guaranteeing investment in education. “Last year, Guangdong spent 146.649 billion RMB on education. With a provincial GDP  totaling 5.7 trillion RMB, if we use the 4% GDP standard for educational funding, the province’s current funding looks to be short more than 800 million.”

Zeng Zhiquan, head of the Guangdong Department of Finance, does not accept this analysis. The Opinions on Strengthening Provincially-Administered University Debt Management jointly published by various provincial departments in 2012 staunchly supports the “loan taker is loan payer” principle. Previous to this, the government had already given a lump sum of more than 150 million RMB to the University City, the Guangzhou Higher Education Mega Center, and has in recent years successively given sums of 20 and 30 million for school development. “We must speed up the development of universities, but we have to do it in a reasonable way, bring out the full potential of schools, and get good results from our investments.”

An official from the Guangdong Department of Education told reporters that they will continue to strengthen and increase the allocation of funds per student, as well as distribute them fairly among schools.



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