Courtney
A friend of mine at the IFC, Julie Zhu, just informed me that their the IFC has officially gotten their hands dirty in China Microfinance.
According to the article, "On January 22, 2008, the IFC officially signed an agreement to support Zhong An Credit, a Shenzhen based microfinance institution. The company will use the proceeds of the $2.5MM convertible loan to grow its business and extend loans to undeserved segments of the market, including microentrepreneurs, small businesses, and other small cash-generation activities that find it difficult to obtain access to capital." According to Richard Ranken, IFC Director for East Asia and Pacific, "building viable microfinance institutions is a vital part of IFC's strategy in China especially in poor and rural areas. The project will have a strong demonstration effect and show that microfinance lending is commercially viable."
I agree with Ranken. This transaction has huge implications for China microfinance. One, it shows that foreign loans to a microfinance institution might be possible in the near future for the field partners with whom we are working. A few caveats include the following: One, Shenzhen is in a gray area of legality in China, floating between HK law and Chinese law. A loophole may have been found to allow them to secure a loan from IFC. Two, Zhong An Credit sounds like it is chartered as a financial institution in China. As such, under China law, it is capable of obtaining commercial loans . Unfortunately, this is not the case for the field partners with whom we work - wherein lies the snag in loaning as opposed to making donations. However, if Zhong An can prove successful this will definitely help out our situation. Lastly, I wonder what the average loan size is at Zhong An Credit? My guess would be that they are engaged more in small enterprise start up loans (i.e $1,000D-$5,000USD+ loan sizes). As such, they are a long shot from our average sized loans of $150-$200USD.
I have a call with Julie who worked on the transaction at IFC this week. I hope to get answers to my questions. Ill keep you posted!
About IFC:
The IFC is the financial arm of the World Bank, fostering sustainable economic growth in developing countries by financing private sector investment. IFC's vision is that poor people have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2BN and mobilized an additional $3.9BN through syndication and structured finance investments in 69 developing countries. To find out more visit, www.ifc.org
About Zhong An Credit:
Zhong An Credit is registered in Shenzhen, China. Its primary business is to provide microcredit and personal loans. The company has 21 branches in Shenzhen and a branch in Hebei Province. Zhong An Credit has ongoing discussions with relevant authorities about opening more branches in Shenzhen and other parts of the country.
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