China has been the dominant success story in poverty reduction over the past 25 years. Poverty rates among the poorest (those living on less than $1.25 per day) fell from 85 percent to 15.9 percent — or by more than 600 million people — from 1981 to 2005. Yet this dramatic movement of individuals out of poverty masks the persistent poverty that hundreds of millions of other people still face. Ten years from now, our vision is that microfinance services will reach a minimum of 10 million poor people in China, with at least half living in the poorer Western and Northern parts of the country.1
- 15.9 percent of the population — or 207 million people — live in abject poverty, earning less than $1.25/day.
- World Bank data suggests that more than 48 percent of the Chinese population — 627 million people — continue to live under the poverty line, earning less than $2.50 per day.
- 70 percent of the rural population in China lives under the poverty line, while only 18 percent of people in urban areas are considered poor.
Roadblocks to Serving More Poor People
While microfinance has existed in China since the early 1980s, fewer than 100,000 poor households are being reached with microfinance services. In other countries, governments have largely given local non-governmental organizations (NGOs) or similar organizations the ability to provide financial services to the poor. Over time, these entities have converted into regulated bank and non-bank entities. In India, for example, such organizations are reaching more than 55 million families. But in China, the government has historically been cautious toward NGOs, though there are now promising signs that its view of NGOs may be changing.
Opportunity to Make an Impact
We believe that the government and other regulatory entities that have long limited the growth and expansion of NGO-led, poverty-focused microfinance are starting to view it more favorably. The government’s legal structure — the Microcredit Company (MCC) — allows for best-practice microfinance and is being widely adopted. Finally, boosted by policy support for microfinance growth, financial institutions, especially state-owned banks, have become increasingly interested in microfinance.
After carefully analyzing the market, there are three critical areas where Grameen Foundation's expertise can make an immediate impact, as poverty-focused microfinance enters a growth phase:
- Ensuring that financing is channeled to those microfinance institutions (MFIs) best-placed to reach large numbers of the poor and poorest
- Ensuring that the poor and poorest are being reached by microfinance services, and measuring that they are moving out of poverty
- Ensuring that microfinance institutions seeking to reach the poor and poorest have critical building blocks in place to grow, including appropriate technology
Collaborating with Local Partners
The problem of poverty cannot be tackled alone. Grameen Foundation partners with a number of local and international organizations that not only serve the poor, but are also like-minded in their commitment to reducing poverty.
For example, on Sept. 15, 2010, Grameen Foundation and the China Social Entrepreneurship Foundation (also known as YouChange Foundation) formed a landmark collaboration designed to increase access to microfinance for millions of poor people in China. The collaboration, known as YouChange PuRong, is a social business that represents a unique partnership between the development sector (YouChange Foundation, Grameen Foundation) and the business community (Jilifu Investment Consulting (Shanghai) Co. Ltd., Beijing Orienland Mortgage Co. Ltd, Fosun Venture Capital Investment Co. Ltd.). Read the full press release.
To find out more about the collaboration, read the speech given by Alex Counts, Grameen Foundation CEO, on the day of the signing; the speech given by Jennifer Meehan, former CEO of Grameen Foundation’s Asia Region; or the speech given by Henry Yuan, CEO of YouChange PuRong.
Local Microfinance Institutions
- Association for the Rural Development of Yilong County (ARDY)
- Association for Rural Development of Poor Areas in Sichuan (ARDPAS)
- Chifeng Zhaowuda
1Our vision is based on the combined efforts of Grameen Foundation as well as other actors in microfinance for the poor in China.