Highlight on China, Part 3 - Interview with GTZ

This interview provides the perspective of Mr. Thorsten Giehler, Program Director of Financial Sector Development at the German Technical Corporation (GTZ), on the current microfinance landscape in China. Mr. Giehler states that:

• Access to finance has been crucial for Chinas development;
• China is one of the few countries that became developed on the basis of an unbalanced and weak formal financial sector;
• The minimum capital requirements to set up a bank in the country are too high;
• The Government should create a favorable environment to allow the establishment of a new tier with lower entry requirements;
• Existing banks are not capable of entering and developing the retail credit market.

The interview compares and contrasts pros and cons, as well as the objectives and results of two pilot program initiated by the Peoples Bank of China (PBOC) and the China Banking Regulatory Commission (CBRC). It concludes by listing the following issues that need to be addressed as financial services are extended into the rural areas of China:

• The creation of a new tier in the banking law to reduce the entry barriers for new financial institutions and the private sector;
• A market-oriented agricultural policy;
• The development of agricultural credit insurance products;
• Capacity development and a clear business orientation of the Postal Saving Bank of China as a potentially main player in microfinance.