Quick Lessons from China Association of Microfinance / CICETE

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.

In effect, this has made SME their main clients, as they are the only ones who can provide titles and assets for collateral. This isn’t exactly “microfinance” as most of us understands it. Even though some might translate 小额贷款公司 as “microloan company,” I prefer to call them “small loan company” since they don’t really serve the poor and their loan amounts are 100K+ RMB.

The upside is that with the 1000+ small loan companies being formed currently, some may move in the rural finance / true microfinance direction. The legal status is there, it’s just a matter of having willing, patient, and socially-focused investors step up.

2) There’s a serious lack of sustainable / commercial microfinance expertise in China.
Aside from expansion capital and legislation, there’s a serious lack of sustainable / commercial microfinance expertise in China.  Microfinance in China has largely been an NGO experiment for the past 15 years.  As a result, there lots of NGO people who have microfinance background; however, they haven’t been exposed to managing for financial sustainability at all. On the other hand, there are lots of finance people / bankers in China, but they don’t really understand microfinance or how it really works.  As a result, there’s a gap in expertise.

It would be wonderful if we can either a) send Chinese NGO microfinance managers for training at a financial sustainable MFI to learn how it works and what it takes or b) send finance people who are truly interested in doing microfinance into the fields and bring their expertise into the NGOs.

Option B is probably easiest, but could lead to mission drift.  Option A is probably best, but most costly.  Option A is more effective in nurturing existing dedicated talent and more inline of the philosophy of microfinance and developing from the ground up than option B.

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