Networks and Cooperation Patterns of Microfinance in China

By Bai Chengyu, Division Director of CICETE

Email: baichengyu@cicete.org

 

A. Definition and Categories of Networks

 

1. The networks listed in this paper are those organizations that have following characteristics:

a) The network is not one organization with branches but a group of organizations that are legally independent

b) They have the common vision, common purpose or common interests

c) They have certain kind of coordination mechanism or unified management system based on an agreement or understanding 

 

2. The networks will be introduced in this paper by following categories in accordance with Chinese context:

a) Networks at the industry level

b) Networks of NGOs

c) Networks of commercial banks or companies

 

B. China Association of Microfinance (CAM), the Network at the industry level

1. History

 

In 2003, the representatives from more than 100 domestic MFIs (mostly NGO-type MFIs) attended the China Microfinance Summit sponsored by the Ford Foundation and the Citi Foundation. The participants appealed to the establishment for an association of the microfinance organizations in China. After this Summit, the Rural Development Institute (hereinafter referred to as RDI) of the China Academy of Social Sciences (hereinafter referred to as CASS, the earliest institution devoted to the experimentation of microfinance in China), together with China International Center for Economic & Technical Exchanges (hereinafter referred to as CICETE, the manager of the largest Microfinance program in China) and the Development Department of All-China Women Federation (hereinafter referred to as ACWF) as well as China

Foundation of Poverty Alleviation (CFPA) decided to jointly initiate and set up the China Association of Microfinance.

 

According to Chinese regulations regarding the management of NGOs, any association should be subordinate to one governmental department. Therefore, the Ministry of Commerce (hereinafter referred to as MOFCOM) imparted its strong support in this regard and agreed to uphold the establishment of this association. Later on, CICETE, the RDI of CASS and the Development Department of ACWF organized the preparation committee for the association, and submitted the application to the Ministry of Civil Affairs (hereinafter referred to as MOCA) via the MOFCOM.

 

In 2004, the Citi Foundation provided a five-year project through CASS to support the establishment of CAM.

 

In November of 2005, CAM was created oat the China Microfinance Development Conference in Beijing, at which more than 100 MFIs that joined this conference unanimously passed the constitution and proclamation of CAM. They also elected the Administrative Committee and the Standing Committee and appointed the secretary-general of CAM. Representatives from the People’s Bank of China (PBOC), the central bank, and the MOCA attended the conference to show their support. After the conference, the secretariat of the CAM formally began to function by making use of the facilities of both CICETE and CASS. The main part of the Secretariat is housed under CICETE.

 

CAM has 110 members at present, in which most are the NGO style MFIs, while two commercial banks and two microcredit companies. CFPA finally withdrew from CAM.

 

2. Partners

2.1 Citi Foundation, the main donor

2.2 UNDP and other international organizations have seats in the Advisory Committee representing donors and TA providers

2.3 GT, strategic cooperator and donor

2.4 PBC, CBRC, MOFCOM and other government line agencies, regulators and policy makers

2.5 Ford Foundation, GF-USA, Planet Finance and other international NGOs, donors and TA providers

2.6 SEEP Network: TA provider

2.7 CASS/CICETE: provide administrative support and subsidies

2.8 All members

 

3. Purpose (function) of network/cooperation

3.1 Policy dialogue and promotion
3.2 Self-discipline
3.3 Information exchange
3.4 Technical support and training
3.5 Fund raising services

4. Performance (achievements)

 

4.1 Policy Dialogue and Promotion:

-      Invited by PBC and China Banking Regulatory Commission (hereinafter referred to as CBRC), CAM is directly involved in the process of rural financial system reform. CAM has also been invited to join the National Consultative Committee of Inclusive Financial Sectors led by the PBC;

-      Prof. Du Xiaoshan, the director of CAM Management Committee and Mr. Bai Chengyu, the Secretary General has submitted several letters and documents on policy issues to the State Council and the country leaders on behalf of CAM’s members. Some documents have instructions and commands from the country leaders and have been sent to regulators for consideration.

-      CAM successfully invited the Nobel Peace Prize Laureate-Professor Muhammad Yunus to join the Grameen Bank Microfinance Workshop in China in October of 2006, which significantly reinforced the cognition in the Chinese general public and central government regarding the microfinance, as well as promoted the issue of new regulations;

-      Co-organized the Asia Microfinance Forum in Beijing in March 2006 together with FDC and BWTP;

-      Since 2005, CAM has organized Citi Microentrepreneurship Award for three consecutive years, which played a great role in creating publicity;

-      CAM conducted research activities and submitted reports and policy advice to the relevant regulatory authorities for their reference in policy making.

 

4.2 Self-regulation:

-      CAM has created rules for self-regulation among its members;

-      CAM wrote one financial manual and constituted one unified financial indicator system for MFIs, and  required all members to follow this manual and system. The financial management manual has been used by PBC in its Guidance for Microcredit Company Management.

 

4.3 Technical Assistance and Training:

-      CAM provided guidance regarding management skills to MFIs;

-      CAM helped some MFIs to plan their transformation scheme for commercialization;

-      CAM cooperated with Citi Microcredit Training Center closely, which holds at least 20 training courses every year.

 

4.4 Information Exchange and Advocacy:

-      CAM compiled microfinance newsletters bi-monthly, and disseminated it to relevant government agencies and regulatory departments, MFIs and international organizations;

-      CAM opened its own website providing news, an online library, a forum, and email among other things. At present, the website has become the professional microfinance website with the highest click rate in the field of microfinance in China;

-      CAM produced annual reports every year since beginning;

-      CAM published 3 research reports (only in Chinese);

-      CAM organized several peer learning visits among members.

 

4.5 Fundraising Service:

-      CAM made a link between investment institutions and MFIs. Citi, Standard Charter, IFC, Blue Orchard, ACCION International, Planet Finance, Hope International, Plan International, SEEP and some other international organizations have setup cooperation relationships with CAM.  Others simply stay in contact with CAM.

-      CAM has offered consultancy to investors and received many international and domestic visitors year round.

 

5. Challenges

5.1 Legal status: has not yet been registered at present, as most of its members are illegal financial institutes

5.2 Ownership: The members need not pay membership fees because CAM has not registered yet

5.3 Governance: Although CASS has its Administrative Committee, CASS and CICETE are the actual decision makers and supervisors for CAM

5.4 Resources of funds: CAM is depending on a grant from the Citi Foundation

5.5 Capacity: Constrained by the above problems, CAM cannot provide all the required services to its members and its contributions to the entire industry are also limited