金融学留学生论文代写节选：中国小额信贷的性能和影响

发布时间：2017-01-31 19:17

评估绩效和影响的小额信贷。这一章的第一部分介绍了小额信贷在中国创新调整或政府参与的情况下两个关键特性。由于不同的政治和社会环境，不能完全在中国复制格莱珉银行小额信贷的最熟悉的模型。因此许多调整和创新原本是为了适应当地的环境和提高效率。关于政府在协助小额信贷有争议的角色，本文同意，国家就有直接作用，支持小额信贷，例如通过帮助启动成本和创造有利的管理和监督系统 。小额信贷留给私人部门 提出了由市场的力量控制向前不是一个明智的方式，尤其是当健全法规尚未应用。

第二部分分别从广度和深度、财务绩效四个方面分析了小额信贷服务提供商的绩效。评估不同类型的小额信贷服务提供者的绩效的目的不是对他们进行排序，并选择最佳的模型，而是看他们是否有积极的影响，，并借鉴他们的经验，为今后的发展。它开始与评估措施的辩论。对于财政的可持续性，相反的是，鲁滨孙认为，本文认为政府或捐赠者的补贴依赖不是很大的罪提供资助的小额信贷项目是更具成本效益比其他扶贫工具。事后分析表明，每一种形式都具有积极的影响，可以共存。正如Tsai所指出的那样，“没有单一类型的信贷能够满足各种潜在借款人的需求，并且没有一种单一的信用类型可以被所有人访问.”。因此，多种形式的小额信贷有助于满足不同的需求群体。

The second part analyses the performance of four types of microfinance providers respectively from the following aspects: width and depth of outreach and financial performance. The purpose of evaluating the performance of different types of microfinance providers is not to rank them and choose the optimal model but to see whether they have positive influences and learn from their experience for future development. It begins with debates about evaluation measures. Regarding the financial sustainability, contrary to what Robinson (2001) contends, this thesis argues that dependence on government or donor subsidy is not a big sin provided the subsidised microfinance programs are more cost effective than other poverty alleviation tools. The analysis afterwards shows that each of these forms has some sign of positive influence and can coexist. As Tsai (2004: 1499) argues, 'no single type of credit can meet the needs of various potential borrowers, and no single type of credit is accessible to everyone'. Therefore, varied form of microfinance is helpful in meeting different demand groups.

The last part of this chapter focuses on the impact of microfinance in China. Apart from poverty alleviation, another impact is the guidance for rural financial reform.

4.1 Key features of China's microfinance
The context of China shaped the unique features of microfinance which have exerted important influence on its performance and impact. Innovative adjustments to the Grameen lending method and government involvement are key characteristics of Chinese version microfinance.

4.1.1 Adjustments and innovations
Unlike most other countries where NGOs are the main provider of microfinance, the tight regulations on NGOs and conventional paternalistic management style of Chinese government facilitate the diversity of microfinance providers. Together with China's rural situation and diverse local context, adjustments and innovations of the lending method and loan product are developed out of the original Grameen Bank model. The level of poverty and main income-generating productive activities in China's different rural areas are different and so are their purposes to apply loans. If one type of microloan product serves rural households from all income levels and finances different activities such as farming and operating small businesses, this microloan product is almost impossible to be effective to all. Therefore, adjustments and innovations in a variety of microfinance providers are necessary and beneficial to the development of microfinance and to some extent the rural finance.

As mentioned earlier, microfinance concept was first introduced in China in the form of Grameen Bank which usually features group lending, high interest rate, weekly or biweekly meeting and instalment, and NGO-run. In the first several years, most microfinance projects either directly follow its lending model or based on similar concept (Armendáriz and Morduch, 2000: 404) especially among NGO programs. However, the model encountered many difficulties in China, thus changes and adjustments were made in order to fit in the local context. Since NGOs are not recognised as financial institutions in China, their dealing with loans was not justified according to the financial regulations. Their existence was only justified by the fact that they claimed poverty reduction as their mission. With that mission, charging interest rates several times higher than commercial banks did not get supports everywhere, especially for those closely connected with local governments. In addition, operating in remote and mountainous areas where the majority of China's poor locate, weekly or biweekly meetings and instalment were extremely costly and unrealistic. Therefore, for most NGOs, only joint liability group lending methodology remains while other terms were adjusted to local circumstances.

RCCs were permitted to provide group joint liability loans in 2000 similar to Grameen model in which group members mutually guarantee repayment of individual loans. In the same year, RCCs introduced an experimental 'trust' loan program using a credit rating system to evaluate the creditworthiness of rural households and provide them with a certificate specifying a maximum loan limit that they can take without any collateral or guarantee; the certificate becomes invalid once they fail to repay (Xie, 2003: 2). With the certificate, the process of applying loans becomes very simple and quick. The results were favourable in pilot areas thus the program expanded rapidly in 2002 (Park, Ren and Wang, 2003). However, in North-west China where rural households are widely scattered and living on raising livestock, both of the two models have some difficulties in implementing as either forming solidarity groups or getting every households rated is hard to achieve. Therefore, they developed some innovative methods to solve the problem and improve the efficiency of RCCs' microloans-cooperation with local firms. The local firms sign contracts with farmers who supply products those firms need, committing a lowest protective price of buying the products, which means when the market price is lower than the protective price the firm buys the products at the protective price and if the market is higher than the protective price the firm buys at the market price (Zhou, Xing and Tong, 2009). Farmers can get some prize if their products have good quality, which motivates farmers to improve productivity (Zhou, Xing and Tong, 2009). Farmers can get microloans easier with the guarantee of local firms which solved the implementing difficulties of RCCs' two lending methods. In addition, this model lowers the lending risk of RCCs as the farmers' income is insured, and guarantees steady and good quality materials local firms need. The research showed that farmers who signed the contract improved income by at least 5000 yuan (Zhou, Xing and Tong, 2009: 1762). This case exemplifies the microfinance innovation occurred based on local contexts and its contribution to rural households and local economy.

4.1.2 Government involvement: debate of state/private roles, both central and local government
Government participation is the most prominent feature of microfinance in China. Different to the majority of research findings, this thesis argues that government involvement is necessary and essential as the mission of microfinance is poverty alleviation and social development which should be supported by government and to some extent the responsibility of the government. The government's financial and policy support does not necessarily mean trouble and inefficiency. The potential problems caused by government involvement such as soft loans should be countered by sound management and regulations, rather than deny government involvement altogether. This is especially the case given the situation of China where local governments, village and township leaders have the strong administrative authority and play a prominent role in almost all development initiatives (Park and Ren, 2001: 41). As in Park and Ren (2001: 41), 'China is the first country where the government itself has initiated a large-scale microfinance program'. The important issue is not whether government should involve or not but whether the way they get involved can generate positive outcomes.

Current regulations require that NGOs 'need to find an administrative body to oversee its activities as a precondition before it can register with local civil affairs authorities' (Zheng and Xu, 2012). For the project of international organisations such as UNDP and UNICEF, the executive body is local government. The degree of support and intervention from the administrative body and local government is different in every county. The support from local government helps NGOs reduce cost and increase recovery rate in several ways (Cheng, 2010: 8). First, when NGOs set up projects local authorities usually provide office space and part of the overheads (Cheng, 2010). Second, NGOs can use the existing network of the village level offices of the administrative body to build trust with local households, screen borrowers, and supervise repayments (Cheng, 2010). It is understandable that doubts arise from local residents when NGOs are newly established and deal with money, thus the creditability of local governments makes them know and accept projects quickly. The village level officials' knowledge about local households assists the screening process and exerts a binding force to repay. On the other hand, the negative influence of local government intervention should also be pointed out, which includes inappropriate personnel appointment, allocating microloans to particular households or industry (Cheng, 2010: 9). According to Cheng (2010: 11), in order to achieve efficiency and good performance, NGOs have to gain support from local government and avoid intervention.

The government can also help generate innovation and improve productivity. As argued in the previous part, financial and organisational innovations based on local context are important in improving microfinance efficiency. In the research produced by Wang and Richter (2011), they find that local governments play a critical role both by providing a supportive environment for innovation and taking part in the generation of innovation. To increase the repayment rate of RCCs' microloans caused by borrowers' pessimism about the program's sustainability and borrowers' unstable income due to the price fluctuation of agricultural products, the local government in this research purchased income insurance for borrowers as subsidy for microloan program guaranteeing a minimum income, and constructed a cooperation mechanism to govern RCCs' relationship to borrowers (Wang and Richter, 2011). Access to loans alone may not raise income unless with new technologies and knowledge to improve productivity, especially in agriculture. The research of Zhou, Xing and Tong (2009: 1763) found that government helped farmers introduce higher productive species of livestock and raising style with microfinance from RCCs, which improved their productivity and income.

The role of government and private sector has been discussed in various subjects in academia. As mentioned in literature review, Rhyne (1998: 7) contends that private sector is the only way to assure financial access to poor people as it has huge resources and will continue providing the service for the profit, while governments, as Rhyne (1998: 7) and Robinson (2001: 22) argue, either do not have enough money to support microfinance or will lose interest in microfinance soon and stop funding. These are untenable arguments for the reason that if private sector operates microfinance for profit then they will end up dealing large loans with big enterprises for higher profit. If government remove financial support for microfinance program one day there must be other programs which will potentially better in poverty alleviation and rural development than microfinance. For the sake of continuity and excluding the possibility to improve is not the most efficient way forward.

4.2 Performance
This part analyses the performance of China's microfinance programs so far. Measures of evaluation are discussed before different types of microfinance programs are assessed. The finding is that the performance of China's microfinance has been a progress compared to its predecessor poverty alleviation policy tools although they are far from perfect.

4.2.1 Debates on measures of evaluation
The measuring of microfinance performance has a double bottom-line-social and financial. The contention between social development and financial sustainability has been briefly reviewed in chapter 2. In the early stage of microfinance development, the focus was on its ability to increase credit access of poor people with high repayment rate and reduce poverty. Then there are increasingly more literature and attention on financial sustainability of microfinance without subsidy. As He et al. point out (2009: 46), the transformation of emphasis from social benefit to commercial sustainability is a trend of microfinance. Undoubtedly both poverty reduction and sustainability are important for microfinance institutions. The prospect of unsustainable institutions undermines confidence of investors and clients, which may lead to withdrawal of support and investment, increasing loan default, and short-term focused mal-management. However, the ultimate mission of microfinance is to reach and serve the financially marginalised poor. The pursuit of financial sustainability should not become an excuse to misguide and discourage microfinance programs from achieving their main objective of poverty reduction (Lau, 2008: 12). Therefore, better targeting, wider and deeper outreach should outweigh the pursuit of subsidy-free financial sustainability.

Depth and width of outreach are commonly-used measures of MFIs. Depth of outreach indicates the poverty level to which individuals have access to microfinance services. Width of outreach refers to the number of people microfinance institutions serve. Deeper outreach need higher transaction cost to provide small-size loans to poorer individuals, while with the same amount of cost, a MFI can widen its outreach by lending bigger loans to middle income rural individuals with lower transaction costs. Therefore, to some extent the depth and width of outreach are also a trade-off. Regarding the targeting, while intentionally excluding the poorest people from taking part is against the principle of microfinance, targeting exclusively the poorest of the poor is too costly and inefficient in poverty reduction and social development. As Fisher and Sriram (2002: 22) argue, a narrow focus on very poor people has often underused the range of development purposes to which microfinance as an instrument can exert.

The financial performance is measured by repayment rates and reliability of subsidy. As argued above, sustainability which refers to the prospect of MFIs to last over long-term is also important for microfinance institutions. Obviously high repayment rate is a basic condition of good financial performance and therefore repayment rate should be a criterion of financial performance. 'Sustainability camp' presented by Rhyne (1998) advocates the use of efficient methods possible, high interest rates enough to cover costs, private sector as the sole provider of microfinance, and focuses more on the width of outreach than depth of outreach. What this thesis argues, different from the sustainability camp, is that reliable source of subsidy can help MFIs achieve sustainability, and private sector is not the only promising provider of microfinance services. Rhyne (1998: 6) argues that the difference between financially viable programs and those non-viable ones is whether they charge high interest rate to cover their costs. High interest rates might not deter small business people as many researches proved. However, considering the situation in China that a large number of China's poor are located in remote mountainous areas living on farming and raising livestock, it is not reasonable to infer farmers too can afford high interest costs. Even though they charge high interest rates, as mentioned in literature review, poverty-focused programs can hardly be financially self-sufficient; even the Grameen Bank cannot breakeven. A common concern about subsidy derived from the failure of subsidised credit programs in 1960s and 70s is that it may lead to inefficiency and mis-targeting. As to efficiency, the key is not subsidy-free but hard budget constraints. Managers will expect to be bailed out after poor performance if the budget constraints are soft and performance criteria are not carefully specified; however, managers have to contend with failures if budget constraints are kept hard and performance criteria are made clear (Morduch, 2000: 624). As to mis-targeting, there are mechanisms other than interest rate that can exclude high income people, such as small loan size. Therefore, if microfinance organisations can get guaranteed steady subsidies, with sound and efficient management, sustainability can be achieved based on trust and confidence among shareholders of the microfinance organisation. In addition, cost effectiveness is more important than the result of subsidy-free financial viability, which can be achieved by improving lending methodologies. For the case of China, adjustments and innovations are introduced to improve the performance, which has been examined earlier in this chapter. Although in practice it is difficult to compare the benefits achieved by microfinance and other interventions, microfinance has greater prospects to be cost-effective (Morduch and Haley, 2002: 4).

4.2.2 NGOs
In general, the outreach of NGOs is deeper than but not as wide as other microfinance providers. They usually operate in poorer areas but are small scale as the law restricts the expansion of NGOs and they can only operate within the registered local area. According to the law, national NGOs cannot have local branches, thus NGOs operating in rural areas has to register with and under supervision of local civil affairs authority (Cheng, 2010: 7). NGOs charge modest interest rates and the repayment rates are comparatively high (Park and Ren, 2001, Cheng, 2003). The early performance of NGO microfinance projects was encouraging, with many programs achieving loan repayment rates of close to 100 per cent (Park, Ren and Wang, 2003: 2). The momentum of NGOs microfinance has been slowing down when other forms of microfinance providers expand. But NGOs are still important players. As the first MFI in China, according to FPC official website, FPC has lent over 100 million yuan to about 35,000 households with over 95 per cent repayment rate by 2006.

The analysis of NGOs is based on second-hand empirical studies. Some of the researchers use survey data to evaluate the performance, for example Park and Ren (2001) analysed 1997 household surveys of three microfinance programs, Cheng (2006) based his study on a 2005 rural household survey of four microfinance projects in four poor counties. Others have carried out field research such as Lau (2008) who interviewed rural households of both microfinance participants and non-participants in Fu'an county.

According to Cheng (2006: 7), most NGO microfinance programs in China are in remote rural areas, employing both direct and indirect means for targeting very poor households. Direct means is fixed requirements that applicants have to meet on per capita income and family assets (Cheng, 2006: 7). Indirect means is using microcredit methodologies such as small loan size, frequent meeting and repayment, and high interest rates to increase borrowing cost and achieve deeper outreach (Cheng, 2006: 8), which acquires from Grameen Bank model. Based on Cheng's (2006) field research, 57.9 per cent of individuals from the middle income group have borrowed from NGOs which is the highest proportion among the different income groups, indicating that the NGOs in surveyed areas have targeted mainly the middle income households. For the two lower income groups, although the proportions of NGO borrowers from these groups are lower than from the middle income group, they are still over 40 per cent which is much higher than that of RCCs and informal borrowers. In terms of outreach, NGOs have extended microfinance services to both middle and low income households in the areas Cheng conducted his research.

As the pioneer of China's microfinance development, NGO has exerted beneficial influence on the livelihoods of considerable amount of poor people. In addition, NGOs brought the concept to China and led to a movement of large scale microfinance promoted by government and financial institutions. However, it is really difficult to expand NGOs' influence under the current regulation that they can only register and provide service locally. Besides, donations as the main funding source are limited and unstable, which also confines its operation and may even threaten its survival.

4.2.3 RCCs
Regarding the role of RCCs as a microfinance provider, some argue that RCCs have the potential to become an effective microfinance provider while others concern that the involvement of formal financial institutions will lose some of its advantages such as the mechanisms of solving asymmetric information problems and collateral problem (Zhou and Takeuchi, 2010: 305) and become less effective. In general, this thesis argues that RCCs have the potential to deliver effective microfinance services provided that they learn from the successful experiments and continue improving.

RCCs are the only financial institutions with branch outlets extending to most villages (Park and Ren, 2001: 42), and account for 90 per cent of the money lent to rural households among formal financial institutions (Zhou and Takeuchi, 2010: 304). By the end of 2001, 32,000 RCCs have developed a microfinance service which account for almost 80% of all RCCs, with about 25% of farming households obtained microloans (Han, 2004: 28). Therefore RCCs currently have the widest outreach among microfinance providers. As to the depth of outreach, many researches showed that RCCs have targeted only middle and high income rural households. Regarding the financial performance, Han (2004: 28) finds that the majority of microfinance projects depend on on-lending from the PBC for their maintenance, have not achieved a definite coverage rate, and are not sustainable. At the end of 2002, the bad loan ratio of RCCs throughout the country is 37 per cent (Han, 2004: 28).

As every township RCC is an independent legal person and profit centre (Xie, 2003: 434), the efficiency and performance of RCCs vary across different localities. The following analysis is mainly based on small scale case studies and field research in different areas. Due to the relationship between RCCs and the government that RCCs are important channels for the government to carry out agricultural and rural support policies (Xie, 2003: 438) and that government provides subsidies to RCCs' microfinance programs, the performance and contribution of RCCs are usually underrated by many researchers. Here are some researches proving that RCCs have performed well in some areas. After a year of pilot experiment, RCCs' individual 'trust' loans have some positive feedbacks since 2002 that farmers have reported an improved ability to obtain loans in pilot areas (Park, Ren and Wang, in Wang, 2003: 9). A 2008 research investigating microfinance in rural area of three districts in North-west China showed that 81.4 per cent of the farmers got their loan from microfinance provided mainly by RCCs, and 78.4 per cent of the loan was used for productive investment (Zhou, Xing and Tong, 2009). Although it is impossible to calculate the exact influence of microloans on income increase, investment on productive activities is promising in stimulating income growth. According to Zhou's (2003) research on the performance of RCCs' individual lending in Jiangsu province, in order to deepen the outreach, they use direct target method that only low income households in government identified hard-core poor counties are eligible for the microloan (Zhou, 2003). Apart from targeting, they try to improve the management as well, such as separate the microloan account for poor rural households from other loan accounts to prevent subsidy funds embezzlement, and establish reward and punishment system to improve repayment (Zhou, 2003). RCCs have made some achievements that in 2001 and 2002 the first two years of microfinance operation RCCs lent 188 million yuan to 113,000 poor households with 99 per cent repayment rate, and led to 800 yuan annual income increase (Zhou, 2003). When the management is sound and subsidy is reliable, RCCs have performed well in this case, and have the potential to perform successfully in other areas.

Criticisms about the ineffectiveness of RCCs mainly focus on its unwillingness to lend to rural households due to high risks, management problems, lack of expertise and low interest rates thus benefit mainly high income households and depend on subsidies. It is true that RCCs' management competency needs further improvement. However apart from that, local governments' attitude and lending mechanisms also influence the results of microfinance. As discussed in a previous part, it has been proved that local innovations in lending methods and loan products with the support of local governments can reduce lending risk thus motivate RCCs to target and lend to poor rural households to improve efficiency and performance.

4.2.4 Government microfinance programs
The performance of government poverty alleviation loans have always been notorious no matter in China or in other countries. The issues of rent-seeking, failure to reach the poor and high rate of non-performing loans are constantly mentioned in relevant researches. A research reveals that government-funded microfinance programs in China have low interest rates and high default rates, which differ little from the failed subsidised loan program it replaced (Park and Ren, 2001: 59), as government loans are treated more as social grants than as commercial loans that compels repayment (Tsai, 2004: 1490). According to China Microfinance Industry Assessment Report (He et al. 2009: 53), of all the microfinance projects with the government background, 50 to 70 per cent are overdue for 90 days. There are few studies on the evaluation of government microloans compared to other forms of microloans in China because of two possible reasons. First, the mind-set that government-funded programs are destined to be ineffective, makes researchers feel less valuable to conduct research on this type of programs. Second, it is difficult to obtain data from and conduct research on government programs.

The majority of studies regard the subsidised low interest rate as the root of ineffectiveness. However this thesis argues that the lack of appropriate incentives accounts more for the ineffectiveness than subsidies. A research carried out by a PBC branch in Chongqing analysed the problems of government poverty alleviation loans in four counties in Chongqing (Lai, Ni and Li, 2006). ABC has been the major financial institution to distribute these loans. However, since ABC has transformed from a specialised bank to a commercial bank, it shrunk its rural branches dramatically. It lost incentive to lend to poor rural households and targets only big and profitable enterprises. In order to fulfil its lending quota set by the state council, ABC lent wholesale loans to local poverty alleviation offices who then lent to rural households. Due to the fact that the government sends out misleading messages that focus more on the policy-based character of the loans and neglect the obligation of repayment, the lending procedures are usually not well-documented, and borrowers tend to consider the loans as government relief and do not feel obliged to repay. In 2005, the repayment rate of microloans for ABC's Qiuyang county branch was only 20 per cent (Lai, Ni and Li, 2006). In this case, every stakeholder has no incentive to fulfil their obligations. If there was some kind of reward and punishment system, it is possible that subsidies are channelled to effectively benefit poor borrowers as proved in the previous part that the subsidies are used to purchase income insurance.

On the one hand government microfinance programs need improvement through better incentive and governance, but on the other hand unbiased and serious attitude free from the previous stereotype about the government funded programs is also needed in relevant researches.

4.2.5 New forms of rural financial institutions
Judged from the number of new rural financial institutions' branches, it looks promising in reaching out to the rural poor. According to CBRC's annual report (CBRC, 2010: 34), by the end of 2010, there are 349 VTBs, 37 RMCCs and 9 LCs. Loans from these institutions totalled 60.09 billion yuan, of which 34.5 per cent provided to 237,000 rural households (CBRC, 2010: 34). As of end 2010, the PSB has established 25,900 branches at county level or below which account for 70 per cent of its total branches (CBRC, 2010: 35). And the number of MCCs increased to more than 5000 by June 2012 according to the data from the PBC (Xinhua, 2012).

Since they have only been in operation for several years, there are few empirical studies on them. The analysis will mainly be made from theoretical perspective. Based on the CBRC guidance, VTBs shall only grant loans to local borrowers to serve the rural economy, establish simplified and flexible organisational structure to improve operational efficiency and prevent abuse of power, and provide personalised financial services by mastering local information (Guo, 2010). In terms of non-performing loans, VTB has performed well that by June 2010 the average non-performing loan ratio is 0.12 per cent of the 193 VTBs in the sample (China Banking Association, 2011: 44). However, it also shows that with the increase of operating time and loans due gradually, non-performing loans have increased (China Banking Association, 2011: 44). A field research (Zhao and Xu, 2011: 24) from the poorest area in Zhejiang province on RMCC finds that as it cooperates with a local agricultural cooperative the loans are all invested in productive activities. Depending solely on members' voluntary deposit, the RMCC in this study suffers the problem of insufficient funds and is currently in deficit (Zhao and Xu, 2011: 22). MCCs are designed to support small and medium-sized rural enterprises rather than rural households (Tang, 2009: 129). This can be seen from a sample survey of over 4300 MCCs in China which reveals that loans smaller than 50,000 yuan account for 1.86 per cent while loans bigger than 500,000 yuan account for 86 per cent (Kang, 2012). Frequent media coverage on the shady deals MCCs involved with shows their profit-driven purpose and the under-regulated situation of the MCC industry, which are unfavourable to the development of microfinance and poverty reduction. PSB has the potential for extensive outreach with its huge number of branches in rural areas but the concrete results remains to be seen.

Although in recent years several new forms of microfinance providers have been set up and the number has been soaring, most of them still need collaterals which will deter a number of low income rural households, especially small farmers. And the profit-seeking nature of most of the MCCs and LCs are only willing to lend large loans comparing to microloans. However they might still benefit other better-off but financially marginalised individuals and micro-enterprises. At this stage only preliminary evaluation can be made; comprehensive results of these new forms cannot be obtained yet.

In sum, from the analysis above we can see that the achievements of different microfinance providers vary a lot in different localities that some research shows NGOs are the main microloan providers in some areas and others are RCCs. The purpose of this thesis is not to choose the best MFI but to argue that microfinance as a whole has a positive impact to rural households and social development, and that different microfinance providers can coexist and better serve the demand groups in various areas. As analysed in chapter 3, the low effectiveness of previous government poverty alleviation loans is one of the reasons for the introduction of microfinance in China. Even though microfinance has not achieved the projected ideal effect, it is a progress as it outperforms the previous programs which it intended to replace.

4.3 Impact
The impact of microfinance in China is mainly two fold-one is its contribution to poverty reduction, rural and social development; the other is its influence on rural financial reform.

4.3.1 Poverty reduction and social development
Compared to financial returns, identifying and measuring social returns are anything but straightforward (Brau and Woller, 2004). One reason is that isolating the impact of a specific development tool from others is very difficult as each tool influences others (Morduch and Haley, 2002: 4). Therefore, the research on the impact of microfinance alone on poverty reduction and social development cannot be accurate and quantified. While the clients of microfinance in China include rural households, microenterprises or small and media size enterprises, and urban unemployed people, this thesis exclusively focuses on the impact of microfinance on rural households where China's poor mainly situates.

Since microfinance was introduced in 1993, optimism that microfinance might help solve the poverty problem more effectively than other poverty reduction tools has grown out of the positive performance of some microfinance programs (Park, Ren and Wang, 2003: 2). It has been proved that microfinance plays an important role in consumption smoothing, skills enhancing, and self-esteem which cannot be measured by monetary terms (Chowdbury, 2009: 8). For example, Lau's (2008: 13) interviews in Fu'an county revealed borrowers' favourable comments about local NGO microfinance that their lives have improved and they feel more relieved, and the majority of the loans were used for productive activities.

Many researches carried out by microfinance practitioners tend to intentionally promote microfinance one-sidedly rather than evaluate it critically and independently. What is worth noting is that among the problems facing by the poor people, lack of credit access is not the only issue. For the very poor people who tend to ration themselves out of the microfinance market due to their poor repayment capacities, the provision of better education, health care, infrastructure would be more important to increase the prospect of higher income (Cheng, 2006: 21). Therefore, providing access to microloans cannot solve the poverty problem for all. In addition, microfinance cannot reach every group of poor people who might need loans. In other words microfinance is not a panacea and the only resort for poverty alleviation. With full recognition of its contributions to poverty alleviation of rural households, 'microfinance services on their own are not going to solve poverty but can only serve as a complementary tool within a broader strategy to reduce poverty' (Fisher and Sriram, 2002: 21).

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