An Analysis of Microfinance Demand in China

This paper analyzes demand for financial services and the potential microcredit market in China.

There are around 249 million rural households, more than 8 million registered unemployed workers and more than 42 million SMEs and microenterprises in China. Current low rural coverage, limited outreach and high loan/deposit ratio of formal financial service institutions also indicate a large potential microfinance market. Study findings indicate that:

• Different sections of the population require different types of microfinance services;
• Unemployed urban workers, impoverished rural households, regular farming rural households, merchant rural households and micro and small enterprises require financial resources;
• Methods that meet these varied needs include: private capital, microcredit, small size commercial loans, cooperative finance, informal finance, venture capital investment and government finance.

Finally, the Chinese government’s policy of opening up the microcredit market provides an excellent opportunity for microcredit investors.