The Asian Development Bank (ADB) has decided to help improve and
expand financial services to the rural poor in underdeveloped areas
Province, southwest China, and the Inner
Mongolia Autonomous Region, north China, through a US$1 million
technical assistance grant.
The grant, from the Poverty Reduction Cooperation Fund, financed
by the Government of the United Kingdom, will restructure and
improve the regulation of existing rural credit cooperatives in the
two regions, and promote the development of micro finance
institutions as an additional mechanism for delivering rural
credit, the bank said.
In Inner Mongolia, one of China's largest provincial areas, rural
households account for 64 percent of the population and about half
of the rural counties are classified as either national or regional
poverty counties. In Guizhou, a mountainous agricultural poor area,
87 percent of the population lives in rural areas and poverty
incidence is three times the national average.
Ying Qian, an ADB Principal Financial Economist, said "Over the
last three to four years, Inner Mongolia and Guizhou have seen
rapid economic growth, fueled mainly by nonagricultural sectors
such as resource intensive industries, small and medium sized
enterprises, and tourism."
Betty Wilkinson, an ADB micro finance specialist, said a range of
affordable and sustainable financial services must be made
available to the rural sector in a bid to sustain this growth and
ensure that it benefits the poor."
The bank said rural credit cooperatives are the only financial
institution with a physical presence in many rural areas in the
country. However they are plagued by unclear ownership structures,
poor corporate governance, administrative problems, and poor
financial performance. Several attempts at reform have proven
In 2003, the Chinese Government piloted a program to clarify the
ownership structure of these cooperatives and transfer the
administrative responsibilities over them from the China Banking
Regulatory Commission to the provincial governments. This latest
reform program has generally shown positive results.
China started to encourage micro lending as an alternative source
of financing in 1994. Until recently, micro finance was restricted
to a series of pilot projects, limiting the options for growth and
ongoing institutional sustainability.
The technical grant will be implemented through two separate
components respectively for Inner Mongolia and Guizhou, each
responsive to the particular needs of the concerned regions and
unique timing of reforms, said the bank.
Generally, the grant will ensure the adoption of suitable
institutional restructuring strategies for various types of
cooperatives as well as appropriate regulatory and supervision
systems for the restructured ones.
It will also develop a sound policy and institutional framework for
micro finance and micro finance institutions, to better inform
policy makers and the public about the importance and feasibility
of micro finance. In particular, the Guizhou Government will adopt
a bidding process for licensing of micro finance
The Chinese Government will contribute US$440,000 equivalent toward
the program's total cost of US$1.44 million. The Financial
Department of Inner Mongolia Autonomous Regional government will be
the project's executing agency for the component in Inner Mongolia,
and the Guizhou Provincial Rural Credit Cooperatives Reform Office
for the component in Guizhou. It is expected to be completed around
(Xinhua News Agency March 5, 2005)