Guangxi Zhuang Minority Autonomous Region (hereafter ‘Guangxi’) faced severe drought that threatened agriculture and rural livelihoods in 2025. To address urgent financing needs, People’s Bank of China Guangxi branch coordinated local banks launched green channels, expedited fund disbursement, and simplified loan approvals to invest in drought resilience. By March 2025, RMB 1221.5bn were released to support drought resilience in Guangxi. Outcomes included timely drought relief measures, sustained farm operations, and reduced repayment pressure. Key lessons: rapid financial mobilization, product innovation, and flexible repayment are critical in drought resilience.
Background
In early 2025, Guangxi experienced a prolonged and severe drought, with some areas such as Mashan County reporting six consecutive months without effective rainfall—one of the worst dry spells in decades. The drought created a cascade of socio-hydrological challenges: farmland suffered from acute water shortages, reducing crop yields in key agricultural sectors such as sugarcane, mulberry, and citrus. Villages faced drinking water scarcity, and rural livelihoods, already vulnerable, were placed under further economic strain.
The problem was not limited to hydrological scarcity. Governance and financial structures were also tested. Farmers and agribusinesses urgently required working capital to purchase irrigation equipment, maintain production, and secure water resources. Yet traditional financing processes were too slow or rigid to meet immediate disaster needs. Without timely support, many households risked losing income, and regional food security could be undermined. In particular, small-scale farmers lacked buffers to absorb losses and were vulnerable to debt repayment cycles. Institutionally, financial institutions had to balance risk control with urgent but low-profit lending. Together, these pressures highlighted that drought is not only a climatic or technical issue but also a governance and investment challenge requiring rapid, flexible financial responses.
Recognizing these challenges, the People’s Bank of China (PBoC) Guangxi branch mobilized its financial governance role to align other local financial operators. PBoC’s status as the state’s financial authority is necessary to ensure that public drought-relief funds were quickly disbursed through ‘green channels’, and private credit institutions could adapt their services. The financing system acted not only as a liquidity provider but also as a disaster management mechanism, bridging gaps between state investment in drought resilience, credit demand, and farmers’ capacity to recover.
This case study thus sits at the intersection of water scarcity, agricultural sustainability, and financial governance. It illustrates how coordinated fiscal and monetary interventions, tailored credit products, and service innovations can help mitigate the impact of extreme drought. By setting this context, the Guangxi experience provides insights into the role of finance in climate resilience and rural livelihood protection.
Photo by Fitzgeraldgerald Muchindu
Actions taken
Rapid response
The PBoC Guangxi Branch worked closely with other financial institutions to establish ‘green channels’. For example, its local offices and treasury departments in disaster-affected counties were instructed to ensure emergency drought-relief funds were processed on a same-day basis, minimizing administrative delays. As a result, 525 transfers totaling RMB 2.08 billion were executed in a short period to finance urgent needs such as water supply for villages, maintenance of irrigation infrastructure, and stabilization of key agricultural sectors.
Tailor financial services at household level
Local financial service providers, guided by the PBoC, were mobilized to accelerate loan approvals and prioritize agricultural lending. PBoC and local financial service providers deployed staff to the field to assess farmers’ needs, allowing tailored financial solutions for each household. Instruments included simplified loan procedures, limited approval times, and same-day disbursement. PBoC’s state authority is important to build farmers’ trust on such tailored financial solutions at household level.
Policy Instruments
The PBoC leveraged monetary policy instruments such as small-scale farm re-lending to reduce financing costs. By channeling low-cost bank funds, financial institutions could offer loans at preferential interest rates, directly supporting recovery from drought. Furthermore, the PBoC issued the 2025 Credit Policy Management Work Plan, instructing banks to innovate with targeted products in investing drought resilience These were designed to link farmers, cooperatives, and agribusinesses into integrated financing chains, enhancing drought resilience.
Local Adaptive Financial Products
At the grassroots level, specialized rural credit products were developed by PBoC to address small-scale, urgent credit needs with flexible amounts and rapid turnaround. Priority lending, interest discounts, and accelerated processing helped farmers secure inputs during critical production windows. In early 2025, RMB 6.75 billion had been issued under these programs. Prioritization was informed by on-site assessments by banks, feedback from local governments, and alignment with national agricultural policy goals of food security and rural stability.
Debt Management and Loan Restructuring
Recognizing that drought not only disrupted production but also repayment capacity, the PBoC coordinate financial institutions to extend or renew loans for vulnerable farmers. For example, in Liuzhou, 343 rollover loans for small-scale farmers were approved in Q1 2025, easing pressure on rural households and preventing defaults.
Stakeholder Roles
- Public sector: PBoC Guangxi Branch provided policy direction, product innovation, and liquidity support, and functioned as the state authority to ensure the reliability of the financial mechanisms.
- Local financial institutions: implemented the drought resilience investment with the support of PBoC, such as loan restructuring.
- Communities and farmers: Actively engaged in consultations, provided on-the-ground data for tailored financial solutions at household level, and used the received financial support for investing in drought resilience.
Overall, the financial mechanism operated by PBoC bridged immediate humanitarian needs with resilience, highlighting finance as a frontline instrument in drought management.
Outcomes
The actions taken in Guangxi produced notable results in alleviating the immediate impacts of drought and building long-term drought resilience. Via fund disbursement, targeted credit expansion, and loan restructuring, the financial system becomes an effective tool for drought mitigation.
Quantitative Outcomes
In Q1 2025, PBoC Guangxi issued over RMB 2.08 billion credits to ensure urgent funds for frontline relief activities such as water supply and irrigation facility. For example, in Pubei County only, RMB 63.26 million in credit were issued in less than 1 month to allow farmers to purchase pumps and irrigation equipment. In Q1 2025, 343 small scale farmers received were granted loan rollovers, preventing defaults and maintaining financial stability in rural communities.
Qualitative Outcomes
The actions provided critical relief for small-scale households and agricultural enterprises. Drinking water shortages in villages such as Mashan’s Gushan Township were partly mitigated by the use of newly built reservoirs and water supply systems funded by PBoC donations, ensuring basic human needs were met. Socially, the program reduced distress migration and stabilized rural incomes during a climatic shock, maintaining community cohesion.
Underlying Reasons for Success
- Strong leadership by the PBoC Guangxi Branch, including its role as the state financial authority, which enhanced the credibility of the financial mechanisms.
- Simplified procedures and ‘green channels’ that cut unnecessary delays.
- Tailored financial products at grass-root level, allowing a fit-for-purpose response for diverse stakeholders (smallholders, agribusinesses, cooperatives).
- Innovative financial products such as re-lending, lost-cost loans, and loan rollovers.
Remaining Challenges
Despite these gains, vulnerabilities persist. Long-term drought resilience requires more sustainable water management and climate-adaptive farming, which are not plausible with only 1 year investment. The experiences and lessons in this year can be used as valuable guidance for following years.
Policy and Institutional Impacts
The program demonstrated how central banking tools can be mobilized for climate-related disasters, setting a precedent for integrating financial policy into disaster risk management. The 2025 Credit Policy Management Work Plan institutionalized innovation in agricultural lending. The successful experience strengthened agricultural value chain financing. At the local level, banks improved their capacity for rapid response, creating institutional learning that may improve resilience in future disasters.
Winners and Losers
- Winners: Farmers and rural enterprises who received timely loans and fund transfers; local communities whose drinking water security was improved; banks that deepened relationships with clients and enhanced reputational standing.
- Losers: Budgets may create trade-offs with other public investments.
Sustainability
The changes show promise for continuity. Many of the financial products and loan restructuring practices can be institutionalized beyond the drought emergency. The integration of bank liquidity tools into rural finance provides a replicable mechanism for future. However, sustainability will depend on parallel investment in drought resilience to reduce recurrent demand for emergency credit.
Resource Use and Sustainability of Resources
Re-lending funds came from bank liquidity provisions. Commercial banks allocated capital for credit issuance but benefited from reduced risk due to policy support. In the long term, balancing these financial interventions with sustainability and building resilient rural drought management systems will be critical.
Overall, the objectives of rapid financial relief, production stabilization, and social protection were largely achieved. Guangxi’s case demonstrates how a financial mechanism can provide timely and scalable support, turning finance into an essential tool of drought management and rural resilience.
Lessons Learned
State involvement should not be minimized: state's participation enhances credibility and trust. Many small farmers lack confidence and knowledge in paper-based contracts but feel secure when backed by state authority, symbolized by the easily-seen national flag. This could be a replicable experience in many countries where the state has higher level of authority and trust than private sector.
Rapid financial mobilization is critical: Establishing ‘green channels’ for fund disbursement and loan approvals ensured that farmers accessed liquidity within days. Speed and simplicity are essential for disaster finance and can be replicated in other regions facing climate shocks.
Tailored financial products enhance resilience: Specialized loans and credits met smallholders’ urgent, short-term needs. Designing products around farmers’ specific production cycles and risks increases both uptake and impact.
Loan restructuring prevents deeper crises: Extending, re-lending, and rolling over loans eased repayment pressure to avoid defaults and maintaining creditworthiness. This approach is a replicable tool for financial institutions in disaster-prone areas.
The Guangxi case demonstrates strong potential for scaling and replication as it integrates public funds, bank liquidity, and commercial finance into a coordinated investment model on drought resilience. It can be adapted in other drought-prone regions by tailoring loan products, allowing rapid disbursement, and combining short-term liquidity with long-term investment in drought resilience.
