Microfinance with Chinese Characteristics
Park, A. & Ren, C.
Journal: World Development, 29(1): 39-62
Publication Date: Jan 2001
Published by: Amsterdam, Netherlands: Elsevier Science Ltd
Document Type: Journal Article
How do governmental and non-governmental microfinance programmes match up?
Analysing household survey data form three microfinance programme sites, this paper attempts to provide an early systematic assessment of Chinese microfinance programmes, which have grown rapidly since 1994, are based on the Grameen model and include an unprecendented large-scale government initiative. The authors examine the empirical propositions that underpin successful microfinance programmes:
- Reaching the poor (targeting);
- Financial and operational performance (sustainability);
- Programme benefits (impact).
The authors conclude that there are many reasons to be optimistic about China's microfinance movement as findings show that nongovernmental programmes are performing well in all three areas, and repayment is nearly 100%. However, governmental programmes have not performed so well and the authors observe that the surveyed programme has not managed either to target the poor effectively or achieve high repayment rates. In conclusion, given the remote location and focus on agricultural projects in China's poor areas, the authors recommend greater flexibility in loan contract terms, especially repayment schedules.They also suggest that:
- China's microfinance movement should be part of an overall strategy to create a rural financial sector with a diversity of institutions (banks, cooperatives, MFIs) able to meet the demands of different groups;
- Efforts should be made to encourage existing financial institutions to target previously excluded savers and borrowers with innovative contracts.
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