Leslie Forman
Leslie is Wokai's Marketing Director.
I just came across this excellent article from China International Business that gives a concise overview of the current state of microfinance in China. Jonathan Haagen profiles PlaNet Finance's work with the Ningxia Yanchi County Association for the Advancement of Women, which Casey and Courtney have visited, and quotes Wokai alumna Kira Dubas.
The article addresses the main tensions in the field of microfinance: individual success stories vs. macro impact, poverty alleviation vs. commercial viability, large loan sizes vs. vast local outreach, etc.
An excerpt:
historically China’s microfinance institutions (MFIs)
have not had the same success as their counterparts in places like
Bangladesh, where Nobel Peace Prize winner Mohammad Yunus pioneered the
industry with the Grameen Bank. While many MFIs in South Asia have
clients numbering in the millions, most of China’s organizations remain
small, generally servicing in the region of 3,000 clients.
NO LEGAL STATUS
China’s relative underdevelopment in this sector can be largely attributed to an issue of legal status. Since their inception in the mid-90s, traditional MFIs in China have not been officially recognized as legal entities and have thus been unable to take on any sort of debt investments.
While demand for microcredit services is immense — an estimated 228 million people in China have no access to financial services — regulatory and legal hurdles have prevented the sort of growth seen in other countries.
Last year, however, the Chinese government granted official status to microcredit and microfinance companies. This presents tremendous opportunities and daunting challenges for existing NGOs, which must now transform themselves into regulated financial institutions.
The regulatory changes, which allow organizations to take on debt, are already catalyzing rapid growth in the sector, increasing both the number of people with access to financial services and the size of the loans they can receive. Some in the industry, however, fear that increased opportunities for profits in microfinance may compromise the original mission of poverty alleviation.
NO LEGAL STATUS
China’s relative underdevelopment in this sector can be largely attributed to an issue of legal status. Since their inception in the mid-90s, traditional MFIs in China have not been officially recognized as legal entities and have thus been unable to take on any sort of debt investments.
While demand for microcredit services is immense — an estimated 228 million people in China have no access to financial services — regulatory and legal hurdles have prevented the sort of growth seen in other countries.
Last year, however, the Chinese government granted official status to microcredit and microfinance companies. This presents tremendous opportunities and daunting challenges for existing NGOs, which must now transform themselves into regulated financial institutions.
The regulatory changes, which allow organizations to take on debt, are already catalyzing rapid growth in the sector, increasing both the number of people with access to financial services and the size of the loans they can receive. Some in the industry, however, fear that increased opportunities for profits in microfinance may compromise the original mission of poverty alleviation.
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