Book series explores challenges of today's microfinance

By Mei Jia ( China Daily ) Updated: 2014-02-18 10:29:32

Originally created to alleviate poverty, microfinance in China is flourishing as the country undergoes reforms aimed at providing financial services that have long been lacking in rural areas.

Microfinance got a boost here when commercial companies were allowed to make such loans in 2005, but professionals and experts are worried that the concept may be going astray - fearing that people in need may not really be able to get the loans for their self-development.

A series of five books titled Microfinance in China has been produced by the China Foundation for Poverty Alleviation, with experts and scholars who have been investigating the issues systematically.

Organized by CFPA Microfinance, the series discusses the nature of microfinance in China and explores its future path.

"We intend to offer full information for policymakers and to promote healthy development of microfinance in the country," the editors say.

Pan Xilong, from Southwestern University of Finance and Economics and author of one of the five books, knows the situation in rural China well. He says good intentions are not always enough to cope with complex situations.

Pan sites one example: a senior herdsman he met in Qinghai province. "He gave up a governmental subsidy of 100 yuan ($16.50) because he told me that the money can barely cover his traveling expenses if he was to claim it in cash from the designated spots," Pan says.

Since the 1980s, microfinance, with its more flexible modes (than merely giving subsidies in cash), has offered one way of nonprofit administrative intervention.

Since Muhammad Yunus embraced the concept as an experiment in rural Bangladesh - and won a Nobel Prize for that successful effort - microfinance has provided loans for entrepreneurs and small businesses that lacked access to banking and related services.

The relationships could be individual or group-based models, in which several entrepreneurs jointly apply for loans and other services.

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