There are three times as many poor people in China – a total of 300 million – as previously thought, according to a new World Bank study released in Dec. 2007. The Chinese government has been cautiously opening up the microfinance sector and now some believe it could be instrumental in closing the gap between the haves and the have-nots. In Sichuan province, one project has been running successfully for 10 years.
Microfinance, for example, can help people buy chickens with their first loan and set up business
In a first-floor shop-stall open to the street, where there are horns and people yelling, there is an abacus and a calculator. No computers, no teller windows.
Yet, the Association of Rural Development of Yilong County has brought banking to this rural area of Sichuan province.
Gao Xiang Jun has been working in this community for 10 years, ever since it was chosen as a place to try out microfinance “because here there are lots of people, but not a lot of land and the transportation isn’t good, economic development is relatively slow and people’s lives are pretty impoverished.”
Not your usual bank
But it’s far from being your usual bank -- she and her loan officers regularly visit borrowers’ homes to check up on the progress of their business and loan repayments.
And when the road is too muddy to go any further, they get out and walk.
Fang Guang Su is one of the micro-bank’s oldest clients. Her house at the top of a hill has no road leading to it -- it looks out over rice fields. With her first loan, Fang bought chickens and ducks. After making good on her loans for 10 years, she would like to take out a bigger loan to expand her small steamed roll business.
But the problem is that even with 99 percent of loans repaid on time, the bank doesn’t have enough money to give, says Gao Xiangjun. The organization can’t take deposits because of government restrictions; so they only have a fixed amount of money.
Help from the UN
The United Nations Development Programme (UNDP), contributed money to the Yilong County micro-lender when it started. Now, changes in government regulations could finally make conditions right for microfinance in China, says UNDP’s Peter Zetterstrom.
“In the last couple of years some really profound changes have taken place that have moved things forward several steps and are this is now rapidly improving conditions for doing microfinance in china,” Zetterstrom said.
New pilot projects starting this year give a formal legal framework to the work similar to that which Gao has been doing in Yilong for years.
“Over the past ten years, when we’ve had difficulties, we have continued because we think that it is a great idea for development. It can help people’s confidence, help them start small businesses, help their families get ahead, this is what families need.”