Microcredit finance, a loan system that is tailored for
impoverished people, is poised for further development in China if
the government lends more support to it, according to this year's
Nobel Peace Prize winner from Bangladesh, Dr. Muhammad Yunus, who
was speaking at an international conference in Beijing on Sunday.
As pioneers of the small-loans financing concept, conference
organizers hoped that Yunus, also known as "the father of
microcredit", and his team would be able to help China explore ways
of replicating the Bangladesh success story.
Grameen Bank (Grameen), founded in 1976, was the first lender in
Bangladesh and indeed the world to provide microcredit financing.
Loans of small amounts are given to the poor to help them start
businesses. The loans are given collateral-free and repayment is
based on an honor system. Sometimes, even the money to buy a mobile
phone is enough to lift a poor person out of poverty.
Grameen is also referred to as the Bank for the Poor.
Over the last 30 years, the bank has lent US$5.72 billion to
more than six million Bangladeshis. Moreover, the microcredit
practice has been taken to other developing countries, benefiting
more than 100 million poor clients worldwide.
According to Su Guoxia, Deputy Director of the Leading Group
Office for Poverty Alleviation, China has made great progress in
reducing poverty over the last 20 years. The number of impoverished
people has decreased from 125 million in 1985 to 23.6 million at
the end of last year. However, China still has a sizeable poor
population, and is in dire need of an efficient way to speed up the
poverty alleviation process.
Microcredit might just be the answer.
Several institutions, mainly non-government organizations
(NGOs), have been experimenting with microcredit in China for the
last 10 years, and have provided assistance to about a hundred
thousand people. But compared with Bangladesh that has over 30
years' experience in microcredit, China still has a long way to
Policies and legal restrictions, regulations and supervision,
and insufficient funding are the three main obstacles to the
sustainable development of microcredit, according to Du Xiaoshan, a
pioneer of microfinance research and practice in China and Deputy
Director of the Rural Development Institute affiliated to the
Chinese Academy of Social Sciences.
Echoing Du' point, Yunus pointed out that policy support is one
of the most important requirements for the successful operation of
microcredit. In addition, the regulations and supervision system
should be clear and transparent to ensure that the loans go to the
right people and that the money is being put to good use. Further,
it is necessary that a microcredit organization, functioning as a
bank, have the permission to collect deposits as well as give out
loans. If it is not allowed to accept deposits, Yunus said, there
would be no source of loans, and the organization would be
Yunus said that these problems are similar in both Bangladesh
and China, difference being that the Bangladeshi government
recently passed legislation governing the establishment of
microcredit banks, and an independent regulation and supervision
institution for the microcredit finance sector.
This represents a big breakthrough for the sector, and China
could learn from Bangladesh's experience.
Prof. H I Latifee, managing director of Grameen, stressed that
the Chinese government has to adopt more favorable policies to
support microfinance if it's to make any significant impact in
Jiao Jinpu, Deputy Director of the Research Bureau of the
People's Bank of China (PBC), the country's central bank, said that
there are now more than 300 NGOs in China running microcredit
businesses. The central bank has been working closely with the
China Banking Regulatory Commission, the Ministry of Finance and
the Ministry of Commerce to give microfinance providers a safe
legal environment within which to operate.
Yunus suggested that while the government continues to develop
the industry, a central fund could be established to keep the
microcredit momentum going. The fund could be run by NGOs. Such a
system has also proven successful in Bangladesh.
It is released yesterday that Grameen and the central bank
are discussing the possibility of opening Grameen branches in China
providing a range of services including deposits, loans, and
insurance and pensions.
Representatives from Chinese government, microcredit
institutions and other international organizations, including the
UN Development Program and World Bank attended the two-day
(China.org.cn by staff reporter Xu Lin, October 24, 2006)