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Micro-credit in dilemma

By Li Zengxin (chinadaily.com.cn)
Updated: 2006-11-10 08:36

Related publication: Related readings:  Nobel laureate: Micro credit will work in China  Calls for improved credit guarantee system  Central bank tightens bank credit  Call a halt to easy credit

Development in micro-credit business in China has been sluggish in the midst of a rapid growth in the banking industry. Anyalysts describe the dilemmas as "those who can, don't, and those who want to, can't."

Micro-credit is a type of loan that is specially-tailored to serve the low-income group. In China, it refers to single loans under 5,000 yuan (US$634). There are currently three forms of micro-credit: first, unemployment trust loans, student loans and poverty reduction loans provided by commercial banks, which amount to hundreds of billions of yuan; second, small loans by rural credit cooperatives, at some 192.7 billion yuan to 61 million rural households, accounting for 27.3 percent of total rural households in the country; third, rural organization associated loans, at 14.1 billion yuan to 12 million households. In the third type, there are currently more than 100 non-governmental organizations (NGOs) providing one billion yuan in loans.

However, China's micro-credit business is still in the initial phase of development. "There are 800 small financial institutions providing such loans, most of which are unable to maintain sustainable growth," said Jiao Jinpu, vice chief of the People's Bank of China Research Bureau.

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The full text is available in the November Issue ofChina Banking.