The China Development Bank (CDB) signed an agreement with China Foundation for Poverty Alleviation (CFPA) Wednesday to provide 100 million yuan (12.8 million U.S. dollars) worth of loans for a pilot micro-credit scheme in China's rural areas.

Liu Kegu, Vice Governor of the CDB, said that the loans should be used in pilot operations and expanded step by step.

The CFPA has established micro-credit branches in 10 designated poverty-stricken counties in seven provinces and provided 150 million yuan of loans. Over 330,000 farmers have benefited since 1996, said Wang Xingzui, secretary-general of the CFPA.

But the micro-credit initiative for farmers has been hampered by a lack of funds, said Wang. So the CFPA applied to the CDB for extra funding.

According to the agreement, the CFPA will be responsible for borrowing, using, managing and returning the funds and will release credit to farmers through its county branches.

The CFPA micro-credit project is one of the most influential in China, a good example of non-governmental organizations managing government poverty reduction resources, said Gao Hongbin, deputy director of the State Council Leading Group Office of Poverty Alleviation and Development.