Microfinance in China: a case analysis

P r e p a r e d b yA r n a b P r a n B o r d o l o iT i ke n d r a j i t G o g o iRu p a m D a sRe e t e s h a g a r w a lB i t o p a n n a t hS u b h a n k a r S e n

Planet Finance Commercial Banks NGOs Rural Credit Cooperatives(RCCs) Postal Saving System

Microfinance in China:A brief note

Development of microfinance can be divided into three phase :

1st phase 1990 : Non-govt. groups pioneered microfinance projects

2nd phase late 1990 : Govt. start taking interest in microfinance sector

3rd phase late 2001 : State owned rural banks through network of Rural Credit Cooperative(RCC) financed US 13 $ billion for microfinance program

Commercial banks: its role and significance

City Commercial Banks(CCB)Formed during 1990s merger and restructuring

Advantages CCB had to enter into microfinance: Local market knowledge Small & Medium Enterprise(SME)focus Infrastructural & financial resourses

Rcc’s were formal rural financial institutions

At the end of 2003,they around 34581 Rcc’s operating in china. Before 1996 Rcc’s operated by agriculture bank of India.

In 2003,china banking regulation commission(CBRC) was instituted and Rccs come under its Supervision.

Rccs reform program focused on assistance and support from central and local govt.

Postal savings system had one of the most largest network of 30000 branches in the rural areas in china.

postal Savings system are well established foundation development for using internet technology.

Non-Government Organisation The international NGO’s started in mid of 1990.

Most of the NGO’s program were on the small scale basis.

PlaNet Finance: its role in Chinese microfinance sector

Established in october1998 Supported financial intermediaries like

bank,cooperatives,microfinance institutions and NGO’s

Basic activitiesProviding technical assistanceAdvised and training for those involve in

microfinance Team: 147 employees,31 regular volunteers,

178 professionals

Premium partners: Altavia,ernst and young, Orange France and sanfoi-aventies

Associate partner: oracle,microsoft and public group

Institutional partners: European commission, world bank, inter-American development bank

A. Training & technical support service: Training: resource centers, e learning, seminar

& conferences Technical support: MFI s,banks,governments Sector strengthening: computer equipment &

support, regional web portals Impact& market studies:sectoral studies,

training Innovation: microfinance of health & natural

disasters

B.Planet rating: Developed by microfinance institutions(MFIs)

Objective attract new source of MFI financing support MFI self evaluation processPromote communication & transparency in

the microfinance sector

C. Planet financing: the main objective of financing activities are

participate in the growth of MFI client and maintain portfolio

Encourage institutions, investors to reach financial ability

Role ofPlaNet Finance indeveloping Chinese microfinance sector

Nignxia CEPA -Delivering training for environmental sustainability for women in the field of agriculture and animal husbandry.

Building for “Ningxia CEPA”

Provide technical assistance to staff training in microfinance

Supporting fund raising efforts

Selection of accounting software package

Its role-

Total budget 40,000 euro origin: JP Morgan

Community Technology Learning Centre

An Microsoft initiative to technical training to undeserved individuals to Bring IT revolution in rural microfinance, partnered with PlaNet Finance

Provide more efficient financial service and capital availability for microfinance.Creating five CTLCs and help clients for useful information training.Provide other community workers to access the microfinance training.200 staff provided training to 30,000 clients.

Role and objectives

Fund amt-220,000 Origin of project- - Microsoft unlimited Potential

Broadband for Barefoot Bankers(B4BB)

Context

Running in China and European Union, target groups are 3 govt designated “Poverty Clients” and leader of public and private sectors of 4 European countries.

Objectives and its role

Creating Digital hubs in 3 poverty countries and enhance the microfinance activities between China and E.u.Automating finance and Scaling operations in rural china.Holding seminars to foster microfinance growth between china and European Union.

Budget cost- 292,280 origin –European commission and Microsoft UP

Downscaling Diagnostic assessment to HCB

Harbin City Commercial Bank

Mission to empower local women federation with Ministry of finance and labour dept to lay off microfinance facilities to women workers. objectives

PlaNet finance to identify the strength and weakness of the internal systems of HCB and prepare strategic development plans.RoleCredit methodologies reviewManagement information systems and reviewRisk management and internal controL

Budget cost 15100 origin of funding – HCB

Capacity building for Plan Chaina

Co-ordinating with “PLAN”- one of World’s largest humanitarian NGO along with Saanxi women organisation, Microsoft initiated to develop market awareness and training on local animal husbandry and handicrafts to local women.

Increase PLAN’s managerial capacity for Microsoft’s operationsImprove Plan China’s existing microfinance programme.

objectives

Role-Business training and informational checkingSupporting in revising the programme's methodologies and process guidelines.Provision of Risk management guidelines

Budget cost- 20,000 origin of funding- plan china