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 more and more limited 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.
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 mobilise deposits. In order to ensure access to financial services for larger groups of the population, special importance is to be attached to rural credit cooperatives, specialized micro credit institutions, City Commercial Banks, as well as the Postal Savings Bank. A suitable legal framework for microfinance institutions has yet to be established.
The development of the insurance industry is a further core element of China’s successful transformation. The current imbalance in the real estate sector is already a menacing signal for the lack of alternatives the population faces when trying to attain financial security.
See how we help to address these issues:
Microfinance and Rural Financial Sector Reform