A Regulation of Microfinance in China

Publication Date: 2004
Published by: GTZ - Deutsche Gesellschaft für Technische Zusammenarbeit GmbH
Document Type: Microsoft PowerPoint

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Proposal for revamping the microfinance sector in China

This document examines the reasons for microfinance, as a sector, not being very successful in China and discusses the need for a new regulation that addresses the gaps that exist.

The document identifies the reasons for a poorly developed microfinance sector as:

• So far, no clear policy, regulation;
• Unclear ownership and weak governance.

The document presents the rationale for a new regulation that would:

• Legalize microfinance operations in China;
• Create competition in the rural financial market;
• Encourage flow of funds into rural areas.

Finally, it makes recommendations on taking care of various aspects of microfinance in the new regulation. These are:

• Establishing sector-wide support institutions;
• Encouraging donors to create new institutions in the pilot provinces and closely monitoring the same;
• Making adequate provisions to prevent illegal deposit taking, money laundering, wrongly targeting groups and ensuring transparencies at all levels.