A Study On Sustainablility Of Microcredit In China

As an anti-poverty tool, the poverty alleviation effect of microcredit is obvious toeveryone. But with the development of global microcredit industry, microcredit is nolonger just means for poverty alleviation, but has become a new type of financialinstrument, the problems in operation of our country are gradually exposed. This paperanalyzes the development of microcredit and the status quo at home and abroad,comparing and analyzing some classical microcredit patterns, such as the Grameen Bankpattern, the Village Banks of Bank Rakyat Indonesia pattern and the BancoSol pattern, byusing case analysis. In my opinion, among the four major factors of national policies,operation of institutions, credit of poors and economic environment, that have influence onthe sustainablility of microcredit in our country, the national policy is the most important.Behaviors of lenders and borrowers in microcredit are decided by macro policies.The problem of microcredit in our country is malfuction of government. For the mostfundamental ways, such as corresponding laws and regulations for microcredit andcompensation mechanism of risk for MFIs, support of government is far from enough. ForMFIs’ financing channels and interest rate of loans which should be deregulated, however,there have been intervened excessively. Excessive intervention of government in themicrofinance institutions has led to less incentive for institutions to expand the scale ofbusiness, and the staff has no incentive to monitor or recycle loans; while for theborrowers, people who need money indeed can’t get a loan, on the countary, those whocan get a loan borrow blindly. Thus, this paper puts forward to determine the legal statusof microcredit institutions as soon as possible, realize the marketization of interest rategradually, improve intermediary services and transform the functions of governmentgradually.