Farming the world over is an uncertain business: farmers are constantly battling bad seasons, pests and diseases, amongst other obstacles meted out by Mother Nature.

In the early days, money was needed to purchase feed and other agricultural necessities, but the farmer’s only asset was the next harvest. As this asset was considered “high risk” by banking standards, Hong Kong farmers were often forced to turn to “laan” (vegetable wholesalers) or unscrupulous money-lenders, who charged a huge interest rate of 8% to 30% per month.

Two loan funds stepped into the scene to help, namely the Vegetable Marketing Organisation Loan Fund and J.E. Joseph Trust Fund. However, these funds were only made available to members of Cooperative Societies, and so unaffiliated farmers remained vulnerable to high interest rates and bad harvests.

The Kadoorie Agricultural Aid Loan Fund (KAALF) was established to grant interest-free or low interest short term loans without security. Initially, KAALF was only available to refugee farmers, but was later opened to all farmers in need. Overwhelmed with applications and administrative complications, KAAA streamlined the process by entering into an agreement with the Government so that the trust fund was administered under a Government Ordinance. This was passed into Hong Kong law in 1955.

Repayment periods lasted from a few months to 3 years. The rate of bad debt remained under 0.25%, mostly due to illness or death, reflecting both the honesty and integrity of the farmers and successful loan management.

“Fong Kuk Fa” (“Paddy Loan”)

“Fong Kuk Fa” literally means “Paddy loan”, which was a short-term loan for paddy farmers. “Paddy loans” were needed because between planting and harvest time, farmers had an arduous three and a half month toil without income. In order to finance their farming needs and to make ends meet, farmers would borrow money at planting time and repay the loan at harvest time.