Microfinance
GTZ supports microfinance operations in more than 40 countries, combining technical assistance to microfinance institutions with financial sector reform. Our activities can be divided into two activities: On the one hand, we help microfinance institutions become financially, legally, and institutionally viable entities and assist in creating network structures. On the other hand, we also support financial sector reforms which help to create an environment that is supportive to microfinance, by cooperating with supervision authorities, training institutions and consultancy services, etc. This approach of advising on the level of microfinance institutions, at sector level, and at macroeconomic level takes into account the fact that financial systems usually have shortcomings on several mutually dependent levels.
China’s rural areas currently experience an exodus of financial institutions. Farmers have less and less access to formal financial services. Micro, small and medium enterprises have difficulties in realizing their investment opportunities. This has led to an expansion of informal credit provision by moneylenders, pawnshops, relatives and informal groups. A growing informal financial sector limits the ability of the People’s Bank of China to apply its monetary policy and to protect the customers from fraud and usury.
Due to insufficient product development and a lack of know-how, retail banking is still a foreign concept in China. The “Big Four” play an increasingly smaller role in the retail market, as they strategically see themselves in other segments and use their branch network mainly to mobilize deposits. In order to ensure access to financial services for larger groups of the population, special importance is to be attached to small and micro financial institutions, such as:
- rural credit cooperatives
- city commercial banks
- specialized micro credit institutions (MCC)
- the postal savings bank
In our project, we support the development of the newly created Micro-Credit Companies (MCC) in five pilot provinces. GTZ was significantly involved in the drafting of the new regulatory guidelines for MCCs, which were published by the People’s Bank of China and CBRC in May 2008, and which mark a milestone in the development of a legal framework for the microfinance sector. Since then, MCCs have been mushrooming. Additionally, we support the Postal Savings Bank of China in its transformation into an effective financial institution capable of providing financial services to a wide range of low income customers. Up to now, more than 200,000 micro credits have been disbursed through its network of branch offices. To counter the problem of lack of qualified human resources for microfinance institutions, the Sino-German Microfinance Capacity Building Initiative has been established, providing consulting and training services for microfinance institutions throughout the country. Furthermore, our asset and equity market project helps to develop alternative sources of financing for enterprises in the bank- dominated Chinese financial sector.
For more information on our activities in this field, please visit our detailed project description: