Microfinance Wholesale Funds: The Case of China (Chinese version)

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The Chinese government has launched a range of initiatives to strengthen its rural financial system during recent years. Although significant progress has been made, the Chinese microfinance sector is still at an early growth stage. This research evaluates whether the establishment of a Chinese microfinance wholesale fund can successfully contribute to the further development of the sector.

This paper, published by the Working Group on Inclusive Finance in China, and led by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Graduate School of The People's Bank of China, and World Microfinance Forum Geneva, builds on published literature about the wholesale funds performance records and on the theory of financial intermediation, and assesses the mechanisms of wholesale funding frameworks. 

Ten semi-structured interviews with experts in the Chinese microfinance sector provide the basis for the transformation of the general findings to the case of China. Concluding from a qualitative analysis of the data, the following dual structure for the future funding framework of the Chinese microfinance sector is proposed:

• The establishment of a Chinese microfinance wholesale fund is recommended asa transitory mechanism. The fund serves to fill current funding gaps andemphasizes capacity building among the retail microfinance institutions. 
• Alternative funding channels between domestic commercial banks and microfinance institutions need to be enhanced in order to enable the sectors commercialization in the long run.