What is the microfinance policy in China?

Microfinance Policy in China I. Main Features of Microfinance in China Recently, many types of organizations conducted microfinance experiments in China. Non-governmental organizations, especially those funded by international aid agencies, play an active role in micro-credit activities in China. There are four common characteristics of China's micro-credit plans in the experimental stage: first, most micro-credit plans are project-based and only exist in the project cycle; Second, because of the dependence on the project, most of the existing microfinance programs adopt foreign technologies and methods; Third, the operation of most microfinance schemes depends on the funds of aid agencies; Fourth, the staff of microfinance projects are mostly employees of government departments or other institutions. Through the cooperation between the Poverty Alleviation and Development Office of the local government and the Agricultural Bank of China, the expansion of microfinance in China has been accelerated. Although in the micro-credit experiment, formal financial institutions, mainly including agricultural banks and rural credit cooperatives, participated in it at a later stage. However, due to the advantages of formal financial institutions in striving for a reasonable regulatory and policy environment for the development of microfinance, they are likely to play an increasingly important role in the future development of microfinance in China. As far as savings and capital transfer or payment are concerned, commercial banks in China have been committed to serving the poor and low-income families. Today, commercial banks and rural credit cooperatives have savings accounts for hundreds of millions of low-income people. In addition to professional microfinance schemes and services provided by formal financial institutions, the informal sector, including usurers, businessmen or fund providers, has always been the most important source of credit funds for the poor in history and in the past. In China, most micro-loans run by non-governmental organizations and government departments choose the way of group guaranteed loans. Generally speaking, the average loan balance of microfinance in China is very small. Although most users of microfinance projects can apply for loans of up to 3,000 yuan, in 2000, the average loan balance of project users was between 500 and 800 yuan. The average loan balance from 65438 to 0999 accounts for about 30% of GDP per capita. The real interest rates charged by microfinance institutions vary greatly. Among them, the government's small loans are subsidized. Rural credit cooperatives implement the normal loan interest rate of credit cooperatives, but the actual interest rate is slightly higher than the normal interest rate because of weekly or monthly installment repayment. The interest rates of most private microfinance schemes are much higher than the benchmark interest rates set by the central bank, but they are still lower than the interest rates of private usury. Most microfinance projects of non-governmental organizations have compulsory savings. In addition to providing financial services to users, microfinance schemes run by the government and most NGOs also provide technical training services. Second, the laws, regulations and policy environment of microfinance in China, legally speaking, all institutions that meet certain conditions can apply for the establishment of rural credit cooperatives, and commercial banks or finance companies can provide microfinance services. However, the conditions and policies adopted in practice are not open to other institutions, or only selectively open to other institutions. Since the financial reform began in the mid-1990s, the system of interest rate marketization and free pricing of credit products by financial institutions has not been fully established, and the benchmark interest rate for deposits and loans is still determined by the People's Bank of China. But in fact, the effective loan interest rate charged by some microfinance institutions in China is much higher than the benchmark interest rate stipulated by the People's Bank of China. In China, because microfinance has always been regarded as a way to help the poor, rather than a special industry or trade, so far there is no financial policy specifically for microfinance institutions. Since almost all microfinance projects are located in poverty-stricken counties, the loan discount policy has also had a certain impact on the repayment behavior and business development of microfinance users. This year, under the relevant policies and regulations of the People's Bank of China, some rural credit cooperatives were forced to close down or be merged. Generally speaking, rural credit cooperatives in poor areas have closed down or merged more than those in developed coastal areas. The contraction of rural credit cooperatives in poor areas may reduce the opportunities for the poor to obtain credit services. The existing non-governmental organization microfinance institutions can neither provide long-term stable expectations for existing staff nor hire qualified staff because they can't afford high wages and social insurance. Three. Prospects for the Development of Microfinance in China On the one hand, the future development of microfinance in China depends on the demand of microfinance market and the ability of different types of microfinance institutions to improve their own quality and flexibly respond to this market, on the other hand, it also depends on the changes of relevant laws, regulations and policy environment. Although it is estimated that the demand for micro-credit in rural areas exceeds $654.38+000 billion. If we consider the penetration of microfinance institutions into cities, suburbs, working-class people and even government employees, and the use of microfinance for consumption, emergency and cash balance, the above estimate of microfinance demand may be many times. If savings deposits are taken into account, the potential demand for microfinance services will be even greater. After China's entry into WTO, China's legal, institutional environment and economic structure will undergo profound changes in the future. On the one hand, these changes will increase the demand of poor farmers for microfinance services, on the other hand, they will also bring some negative effects. Because rural credit cooperatives have the professional ability of formal financial institutions and the advantages of service outlets all over the country, if they can effectively remove the obstacles that hinder their development into microfinance banks, they can grow into the main providers of microfinance services. Some well-run non-governmental organizations microfinance institutions also have the potential to provide continuous microfinance services to farmers. In addition, commercial banks, possible specialized microfinance banks, independent credit cooperatives and finance companies may also play an important role in the future development of microfinance industry in China. Four. Suggestions Based on the current internal and external environment of China's microfinance development, the following suggestions are put forward for China's microfinance participants. 1. Suggestions to the government-The government should realize that microfinance is no longer just a means to help the poor, but a special industry or trade. Cancel the discount loan policy and replace it with a new policy to support the development of microfinance. Strive to solve the problem of non-performing loans of rural credit cooperatives. Organize specialized institutions to provide technical services to all poor and low-income farmers and liberate microfinance institutions from providing these services. 2. Suggestions to the central bank-the central bank should gradually liberalize interest rates and allow financial institutions to freely price their credit products. Adjust the accreditation of financial institutions and formulate new access standards and approval procedures for microfinance institutions. Establish a guarantee fund for microfinance institutions to help them raise funds from the financial market. Provide technical support to microfinance institutions to improve their management and operation level. Take effective measures to gradually change the management mode of rural credit cooperatives and solve their non-performing loans. 3. Suggestions for microfinance institutions-Microfinance institutions should: improve their operating level and economic sustainability through active practice and strengthening management. Strengthen mutual cooperation and exchange regularly or irregularly, and share information and best operating methods or lessons. 4. Suggestions for aid agencies-aid construction should: strengthen mutual exchanges and cooperation, formulate policies coordinated with the development of microfinance, share information and good operational experience, and negotiate with the government to support the development of microfinance. Continue to provide technical and financial support to microfinance institutions to promote their development to a sustainable stage. Priority should be given to supporting existing financial institutions to introduce the best operation mode, establishing guarantee funds, helping microfinance institutions to raise funds from the financial market, and providing financial support for institutional capacity building. (abstract data)