Review of Microfinance Development of China in 2010

1.      After two years of exploration, Small-loan Companies (MCC) have got there business  position, as described by Shenzhen Microcredit Company Association, small loan companies are targeting mainly SMEs. According to the statistics, most of the small loan companies and most of their loan portfolio are based on collaterals and not microcredit. Few of the small loan companies are committed to targeting the bottom of the pyramid, but not the mainstream of small loan companies.

2.      NGO MFIs who are targeting the poor tried to be transferred into commercialized MFIs, but facing big challenges on mission drift and regulations.

3.      The future of upgrading small loan company to the community bank is uncertain.

4.      Large and medium-sized commercial Banks forayed into microfinance market, but also start from SME finance. Though China Postal Bank put microfinance in its strategy, there is still a long way for them to develop microfinance as the mainstream business.

5.      The village cooperative funds have developed in large scale by the government investment, but they lack of sustainability.

6.      The P2P lending market has created.

7.      The wholesaling market for MFIs has created.

8.      The concept of microcredit or microfinance is quite confused on the markets, and this is not conducive to the new regulation for microfinance.

9.      Either microcredit or SME finance initiatives shown that these businesses have approaches for risk control and potential of profitability.

10.  In general, the supply of both microcredit and SME finance can not meet the huge demand, the gap is large and the market pattern has not been changed.

Outlook of Microfinance Development of China in 2011

1.      Microfinance and SME finance market layer will gradually become clear. Financial institutions will be more accurate positioning of their own businesses.

2.      Both Microfinance and SME lending business model will gradually become mature, the condition for large-scale development will become permitted.

3.      Promoted by the policy and regulations, more commercial banks will involve microfinance and SME finance business.

4.       Microfinance policy and regulations will have appropriate adjustments.

5.       More microfinance institutions will be setup in the western areas in China.

6.       The commercialization of NGO MFIs will be accelerated.

7.       Although the quantity of small loan company will increase, there will be stagnation or collapse of individual institutions.

8.       Investment in microfinance will have a climax.

9.       Some regions may have a strong competitive situation

10.   More regional microfinance association will be setup.