Microfinance and Poverty Alleviation: United Nations Collaboration with Chinese Experiments

This paper reviews the experience of microfinance projects in China that have had the support of the United Nations (UN), giving particular emphasis to two case studies.

The paper:

• Examines the evolving policy environment in China for poverty alleviation and for the implementation of microfinance schemes, providing in-depth discussions of:
  • Poverty in the Chinese context;
  • The evolution of the "Poverty Alleviation Policy" and its functioning;
  • Structural issues and poverty alleviation loans.
• Draws upon the conceptual framework and principles of microfinance programs elsewhere.
• Derives lessons from UN-supported projects, such as:
  • The International Fund for Agricultural Development (IFAD);
  • United Nations Development Programme (UNDP);
  • World Food Programme (WFP).
• Identifies implications for future planning;
• Examines case studies of two UN-supported microfinance schemes.

The paper presents findings and lessons about:

• Outreach;
• Operational and financial self-sufficiency;
• Institutional sustainability;
• Managing risk;
• Designing credit arrangements;
• Savings;
• Minimalist models of microfinance;
• Integrated projects using microfinance;
• Microfinance, enterprises and poverty alleviation.

It concludes by recommending:

• The rethinking of basic assumptions;
• The establishment of a "Policy on Microfinance for the Poor";
• Multiple models of microfinance for poverty alleviation;
• The elimination of the "township enterprise" components from the Microfinance for Poverty Alleviation Project;
• The introduction of savings as an essential element of microfinance for the poor;
• Professionalism in microfinance;
• The continuation of experimentation and research on microfinance.