Plans are underway to set up the country's first
Grameen-assisted microcredit networks, Nobel Peace Prize laureate
Muhammad Yunus said at the weekend.
Speaking at the Boao Forum for Asia, Yunus said that the
governor of the host island province Hainan, which is relatively
poor compared with its mainland neighbors, had asked him to help
set up a microcredit network.
A delegation from the province, headed by the one of its
vice-governors, will fly to Bangkok next month, although an exact
timetable for setting up the network has yet to be finalized, Yunus
said.
He said that similar arrangements were in place in North China's
Inner Mongolia Autonomous Region and Southwest China's Sichuan
Province, without giving further details.
While acknowledging the great potential for microcredit networks
in rural China, Yunus urged the banking authorities to help create
a better legal environment for the projects.
For instance, new regulations from the China Banking Regulatory
Commission (CBRC) in January aimed at facilitating banks' entry
into the rural market and improving their financial services,
lowered the minimum required registered capital to 3 million yuan
($384,615) for county banks and 1 million yuan for village
banks.
Three types of experimental rural banks have already been set up
in less developed provinces, including Sichuan, Jilin, Gansu,
Qinghai, Hubei and Inner Mongolia Autonomous Region under the
supervision of the CBRC.
However, the CBRC regulations do not apply to grassroots
financial institutions that provide only loan services and not
deposit facilities, something Yunus strongly opposes.
"The ban cuts a leg off these organisations, and they have to
rely on other financial institutions for capital support, which is
not a healthy practice," said Yunus.
Sound backing
The new regulations also stipulate that each rural microcredit
bank should be backed by a traditional bank, holding a minimum
20-percent stake. No other shareholder is permitted to hold more
than a 10-percent stake.
While many organisations and financial bodies are interested in
joining the program, the investment rules must be made simple and
convenient, Yunus said.
Du Xiaoshan, a pioneer of microfinance research and practice in
China, and also deputy director of the Rural Development Institute
affiliated to the Chinese Academy of Social Sciences, agreed.
Du said that to build up an effective rural banking system, more
organizations should be involved.
Devoted to poverty alleviation, Yunus urged banks to set up
subsidiaries to make small loans to the world's poor, saying "the
exciting area" offered plentiful business opportunities.
Yunus said he had called on conventional banks to enter the
microcredit field, as pioneered by the Grameen Bank he founded, but
"so far the response has not been as enthusiastic as I would have
liked".
He said: "(Conventional banks) have the expertise and the
knowledge. If they opened up their services, they could make things
happen faster than anybody else could."
Yunus was keen to point out, however, that this particular
branch of financial services requires specialist knowledge, and he
urged banks considering moving into the market to set up separate
subsidiaries.
"Someone who is used to conventional banking will find it very
difficult to understand these unconventional methods," he said.
Grameen Bank was set up in 1983 and pioneered the concept of
microcredit by giving very small loans to poor Bangladeshis, almost
all of them women, who did not qualify for loans from conventional
banks.
No collateral is needed for the loans, and repayment is based on
an honor system. The bank achieves an almost 100-percent repayment
rate.
(China Daily April 23, 2007)