Wokai Blog: Microcredit In China: Why Is Growth So Slow & What Are Some Recommendations for Policy Makers?

The Global Policy Institute at the London Metropolitan University has recently published the first of a series of reports on microfinance in China. In this paper they offer their view of what is preventing microcredit from developing in China and offer recommendations for Chinese policy makers that wish to promote this sector.

According to their analysis, the slow growth of microcredit in China is attributed to a set up regulations that need to be amended, lack of access to domestic and international capital markets as source of funding, and tight economic viability of microcredit companies. The conclusion is that while some non profit NGOs operating in China are laudable, true impact on the millions of people at the bottom of the pyramid can only happen with the implementation of a double-bottom-line approach of helping the poor as well as establishing financially viable lending entities.

The proposal is to create a newer, more flexible organization regulated by an independent body that will allow customer deposits, will not have strict minimum capital requirements, is tax-exempt, and can accept investment domestically and internationally.

The report introduces key relevant facts in Part 1, highlights current problems in Part 2, and offers policy recommendations in Part 3. Conclusions are the results of field visits to Association of Rural Development of Yilong County (ARDY- Wokai's Sichuan Field Partner) as well as meetings with organizations like UNDP, PlanetFinance, Chinese Academy of Social Science and Grameen.

This 20 page report is well written and efinitely worth a read. Download here.