Research On The Mechanism Of Economic Growth Driven By Microfinance In China

Poverty is a very big challenge for China to take as well as for any other developing countries. Back to the early 90s of the 20th century, microfinance was first introduced as a poverty reduction strategy into China. Since then, we have been learning from other countries'successful experience in microfinance and practicing the microfinance in our own country. After years of practicing, does microfinance work fairly well as a poverty reduction strategy in China? What improvements can we still make to get the microfinance to work better? These questions are the ones to be discussed in this thesis.Chapter 1: This chapter is basically a review of the former researches on microfinance theory and practice. First of all, there is a review of some economic theories which gave the birth to the modern microfinance theory. Then, definitions of microfinance, comments on the effects of microfinance practice, and indicators of the effectiveness of microfinance schemes and institutions are introduced.Chapter 2: At the beginning of this chapter, there is a brief review of the experiments in microfinance for poverty alleviation in China. This review is more focus on the microfinance schemes carried out by none-governmental organizations (NGO). However, the micro-credit experiments performed by RCCs (Rural Credit Co-operatives) and commercial banks are mentioned in this chapter as well, because some indicators are applied in the following chapter to testing the effectiveness of these experiments. And there is also a comparison between microfinance experiments in China and successful microfinance schemes in other developing countries. Chapter 3: In this chapter, indicators of the outreach of microfinance services and sustainability are applied to testing the effectiveness of microfinance schemes by different institutions. Data analysis is used to answer the question if microfinance services can substitute for the informal financial activities which are quite popular in the rural area. And explanations to the findings are given at the end of this chapter.Chapter 4: Since the findings of the former chapter indicate that the experiments in microfinance in China are not as successful as people expected. Some recommendations are given in this chapter, which may improve the microfinance schemes in China.Compared with the existing research papers on microfinance, the main contributions of this thesis may be the following two findings:①Through the data analysis, findings reveal that the experiments in microfinance conducted for poverty alleviation in China were not as successful as people believed.②The reason of this may be that microfinance institutions want to fulfill multiple tasks simultaneously when the tasks may actually conflict. Thus, microfinance institutions should be encouraged to set up single task, either for poverty alleviation purpose or for commercial purpose.