Current Situation and Future Prospects for Microfinance in China

This paper provides a general picture of the current situation of microcredit in China, and discusses its future prospects. Rural Credit Cooperatives are the primary source of microcredit in rural areas, but they are generally loss-making with little scope for future growth. Study findings include:

• Agricultural Bank of China covers urban and rural credit markets, and is likely to become a significant force in rural microfinance;
• China Postal Savings Bank has great potential to serve unbanked rural areas and become a distinctive retail bank;
• Most shareholding commercial banks have not paid attention to microcredit so far, but some have made significant progress in urban and rural microcredit;
• Credit-only microcredit companies could become one of the fastest-growing microcredit providers if they improved their operational and management capacities;
• Village banks have been varied in their performance;
• Rural Mutual Credit Cooperatives have experienced unbalanced development with uneven performance;
• NGO MFIs need to be aided in their development by proper regulation.

Finally, the paper examines government policies and regulations on microcredit in China, and makes recommendations for their improvement.