The Development of Microfinance in China

Publication Date: 2003
Published by: Hongkong, China: Rural Development Institute, Chinese Academy of Social Sciences
Document Type: Paper (Microsoft Word)

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How has microfinance developed in China?

This paper discusses the development of microfinance in China and states that:

• The process began in the 1990s with poverty reduction as the goal;
• In the last ten years, microfinance in China has drawn from specific techniques and models to introduce a system suitable to the Chinese situation;
• Three organizational forms have emerged:
  • Pilot practices of funding organizations;
  • Large scale campaigns against poverty by the Government;
  • Rural financial services provided by formal funding organizations.

The paper argues that:

• The practices of different organizations have helped in:
  • Poverty reduction,
  • The growth of Chinese microfinance,
  • Improvement of rural financial services;
• They have also contributed in testing the assumptions and suitability of microfinance in China while exposed to certain constraints.

The paper delineates the basic outline of microfinance growth in China through examining its organizations, systems, methodologies and fundamental assumptions. It concludes that:

• The most critical constraint to China’s microfinance development is its organizational structure, although weaknesses in new product development, delivery systems and management also exist;
• This organizational bottleneck results in a lack of effective supply channels in China, thus creating a supply-driven, rather than a demand-driven, system.