Agricultural Bank Offers CFPA Microfinance RMB 200 Million Wholesale Loan

Posted in MF Marketplace on October 20th, 2009 by Yam Ki – 4 Comments
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According to a Sohu Article, the Agricultural Bank of China (ABC) has offered CFPA Microfinance a 200 million yuan wholesale loan.

Based on my research of CFPA Microfinance, this will be CFPA Microfinance’s third wholesale loan agreement.  The first was with the China Development Bank back in December 2006 for 100 million yuan and the second was a revolving credit facility with Standard Chartered Bank in January 2008 for 20 million yuan.

Such wholesale loan agreement is a win-win for both parties.  CFPA Microfinance gets additional funds to expand its loan capital and ABC meets the three agricultural dimensions policy loan requirement (三农) mandated by the government.  Moreover, ABC doesn’t have to waste its time making microfinance loans on its own, which it has done poorly in the past.  Depending on how much leeway ABC with its auditors on how to classify the loan (whether it is considered to be implicitly government backed), it may only need to be put up minimum capital reserve requirements.

This agreement not only increases CFPA Microfinance’s loan capital, it solidifies the MFI’s lead in China’s microfinance sector.

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Posted in MF Marketplace on October 20th, 2009 by Yam Ki – 4 Comments
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Recent Microfinance Activity in China-Grameen Bank, SKS, and HSBC

Posted in MF Marketplace on October 15th, 2009 by Yam Ki – 7 Comments
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Sorry I haven’t been posting much lately.  Classes and midterms at SIPA seem to be getting in the way.  If only I could count my blog posts as papers for class!

Lately, there has been a few noteworthy news pieces on China’s microfinance development.  Dr. Yunus announced at the Clinton Global Initiative that it will be starting a bank in Sichuan.  Jack Ma’s Alibaba is said to contribute $5 million to kick start lending.  Dr. Yunus has been trying to start a true Grameen Bank in China since 2006.  I am not sure if the small loan company license (小额贷款公司) has been issued yet, but you have to give them credit for trying.  Perhaps the announcement is to increase pressure for the government to hand over licenses quick.

Vikram Akula of SKS recently wrote an Op-Ed in the WSJ about opening up investments in MFIs in China.  He is definitely correct in pointing out that most casual observers who sees China as ‘developed’ and don’t need microfinance is wrong.  He is also correct that the sector needs to open up.  But I would have like to see what his ideas are in terms of liberalizing the sector.  Allowing foreign investment is definitely one option (which he is, of course, interested in), but what else can China do domestically?  Are there different models that he can share given India and SKS’s experience?  As he pointed out, current regulations do not allow MFIs to take deposits.  What then, are the risks of the MFIs?  What should MFIs who do not take deposits be aware of in terms of managing risks?

Lastly, a press release from from HSBC came out yesterday that it has partnered with Women’s World Banking (WWB) in provided microloans through its rural banks in China, specifically in Hebei’s Suizhou branch and Chongqing Dazu branch.  According to a Caijing article, the product is called “Happy Loans” (”贷款乐”).  The product has been piloting for 3 months in Suizhou and is currently being expanded.  What is WWB’s role in this partnership?  Is it providing operational expertise?  If so, does this mean that WWB (and perhaps MFIs in general) is better at assessing credit worthiness of low-income borrowers than a large multinational bank such as HSBC?  Or is HSBC simply outsourcing it’s operation activities to WWB?  From previous research, it seems that HSBC Rural Bank’s branches tend to focus only on export oriented areas (mostly exporting mushrooms actually), specifically for SMEs.  Are they moving away from SME finance and moving towards ‘real’ microfinance?  What are the terms of the loans?

Questions to ponder during my midterms.

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Posted in MF Marketplace on October 15th, 2009 by Yam Ki – 7 Comments
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With Schlein, Accion Signals Business Focus

Posted in Inner Mongolia, MF Talent on September 13th, 2009 by Yam Ki – 3 Comments
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Two days ago, Accion release a press release that it has selected Michael Schlein as its President and CEO.  Schlien is an excellent choice given his experience at Citi’s International Franchise Management unit.  The appointment signals that Accion is likely going to grow in towards the commercialization path (remembering it’s 100% return on Compartamos Banco).

I noted the mention of China in the PR.  I’ve heard that Accion just hired a new operations person for their Inner Mongolia office, so I expect to see their MF efforts in China to kick back up soon.

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Posted in Inner Mongolia, MF Talent on September 13th, 2009 by Yam Ki – 3 Comments
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Auditing Banks for Policy Implementation

Posted in Finance Policy on August 21st, 2009 by Yam Ki – Be the first to comment
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Do as I say, not as I do!  Just saw an article in Caijing citing a 21st Century Business Herald article about the National Audit Office auditing state banks to check if they have complied with the national stimulus policy and extend credit to infrastructure projects.  As I was reading it, I thought it would be great if they did the same with the microcredit companies, village banks, and other “microfinance” and poverty alleviation related lending. Did the MCCs and VBs really make loans targeted in rural and low income areas as intended by the policy or have they focused on wealthier regions and only for SMEs?  Yes, I am asking a rhetorical question.

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Posted in Finance Policy on August 21st, 2009 by Yam Ki – Be the first to comment
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CBRC’s Three Year New Rural Financial Institution Plan May Have Unintended Effects

Posted in Finance Policy on July 31st, 2009 by Yam Ki – Be the first to comment
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What does it take to get more banks into poor rural areas? Apparently, by giving out banking licenses in the wealthy regions. That is what the CBRC is proposing in its Three Year Rural Financing Plan. read more »

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Posted in Finance Policy on July 31st, 2009 by Yam Ki – Be the first to comment
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Chinese Microentrepreneurs May Get Legal Licenses!

Posted in MF Marketplace, MF Talent, SAIC Policy on July 23rd, 2009 by Yam Ki – 1 Comment
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Fry Tofu Seller in Beijing

Happy Fry Tofu Seller in Beijing

China’s State Council just issued a draft ordinance that allows street vendors and other microentrepreneurs to register for permits and recruit employees legally. The draft ordinance, titled “Individual and Household Business Ordinance (Draft)” / “个体工商户条例(征求意见稿)“, will allow micro-enterprises to get access to loans from alternative sources such as small loan companies and village banks. read more »

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Posted in MF Marketplace, MF Talent, SAIC Policy on July 23rd, 2009 by Yam Ki – 1 Comment
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Standard Chartered Village Bank Offers Unsecured Loans to Farmers

Posted in Inner Mongolia, MF Marketplace on July 9th, 2009 by Yam Ki – Be the first to comment
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Standard Chartered Flyer

Standard Chartered Flyer

The hype around Village Banks is finally delivering something real.  Standard Chartered Village Bank in Inner Mongolia made an announcement yesterday that it will offer unsecured credit to farmers.

Established in August 2007 by the CBRC, Village Banks (VB) were seen as the path to bring credit to China’s rural areas.  Like microcredit companies, VBs can only mobilize deposit and make loans within their county of incorporation.  Three foreign banks have established local branches under read more »

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Posted in Inner Mongolia, MF Marketplace on July 9th, 2009 by Yam Ki – Be the first to comment
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Quick Lessons from China Association of Microfinance / CICETE

Posted in Finance Policy, MF Talent on July 2nd, 2009 by Yam Ki – Be the first to comment
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I had a meeting with a source at the China Association of Microfinance / China International Center for Economic and Technical Exchanges (CICETE) yesterday and learned a few things:

1) Small Loan Company (小额贷款公司) is really Microcredit Company version 2 (小额信贷公司).

Apparently the CBRC never intended for the microcredit company to be completely “credit” base. They wanted them to provide loans with collateral / guarantees; hence the rename and new law. read more »

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Posted in Finance Policy, MF Talent on July 2nd, 2009 by Yam Ki – Be the first to comment
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First Small Loan Company Registered in Xinjiang

Posted in Finance Policy, Xinjiang on June 27th, 2009 by Yam Ki – Be the first to comment
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I came across an interesting press release about a set of Small Loan Companies (SLCs) that just got registered in Urumqi, Xinjiang this morning.

The Uyghur Autonomous Region Government issued a pilot test program guideline for SLCs in February 2009. A total of 11 firms applied to register and 5 were provided the license. The largest is Huachun Small Loan Company (华春小额贷款股份有限公司), the focus of the press release.

A few facts of particular interest from the press release that I noticed were: read more »

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Posted in Finance Policy, Xinjiang on June 27th, 2009 by Yam Ki – Be the first to comment
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Microfinance–Everyone is doing it!

Posted in MF Marketplace on June 25th, 2009 by Yam Ki – Be the first to comment
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Everyone is getting excited about microfinance in China. What’s there not to like? It’s “micro” (aka grassroots and chic) and its finance (yay, money!). If someone can win a Nobel Peace prize for it, it has to be good right?

Photo Credit: FXCaliber

Photo Credit: FXCaliber

The Chinese government is so eager about it, it has tried to promote it (by my count) seven different times: Rural Credit Cooperatives, Agricultural Development Bank loans, Microcredit Companies, Village Banks, Rural Mutual Credit Cooperatives, Small Loan Companies, and Postal Savings Bank loans.

The private sector is also excited with thousands of registered guarantee companies and small loan companies. Not to mention the hundreds of companies registered with consulting / management licenses that engage in lending-like business model.  With the latest round of government push for microfinance to help the rural poor and the unemployed, even web entrepreneurs are jumping in for some action.  Many of these online sites are throwing around the word “microfinance” along with “P2P lending” and “social responsibility” for added chic.

But are they really microfinance? read more »

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Posted in MF Marketplace on June 25th, 2009 by Yam Ki – Be the first to comment
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