October's Featured Essay: China

While microfinance in China began in the early 1990s, it has not reached the scale one might expect in this large, densely populated country. In this essay, Du Xiaoshan, founder of China’s first microfinance organization, explores the evolution of national level policies supporting microfinance in China, focusing specifically on those areas which hinder its growth and offering recommendations for ongoing regulatory reform.

Du's recommendations affecting China's commercial banks, rural credit cooperatives (RCCs), and NGO-MFIs will help to clarify the roles of each type of institution within the financial sector, paving the way for each to sustainably serve the poor in the future.

• RCCs need to deal with historical loan losses and improve corporate governance in order to increase their microfinance portfolios. 
• NGOs are hampered by a lack of clear legal status that must be resolved.
• The postal savings network should be tapped for its potential in providing a range of services across the country, including internal remittances. 
• Interest rates restrictions must be eased in recognition of the increased lending costs.