MICROCAPITAL BRIEF: PlaNet Finance China Reports One Third of Chinese Have No Access to Financial Services

A report released by PlaNet Finance China, a nonprofit acting to promote development of the microfinance sector, suggests that one third of China’s people have no access to financial services [1]. According to population data from the CIA World Factbook, this would total roughly 446 million people, a segment greater than the total population of all but one other nation, India [2].

The report blamed the commercial banks and the regulatory environment for this shortfall. It stated that existing banks will only loan money to land owners, refusing to issue unsecured loans [1].

While informal borrowing from family or moneylenders exists in China, official microfinance is hamstrung by rigid regulation. These legitimate microfinance institutions are government-run at the county level and offer interest rates capped at four times the Shanghai Interbank Offered Rate (SHIBOR), the rate banks charge on interbank loans. The SHIBOR rate on annual interbank loans is 2.36 percent, which would cap microfinance interest rates at 9.44 percent [3]. The authors contend that these issues conspire to restrict growth of the Chinese microfinance market [1].

Gabrielle Harris, Executive Director of PlaNet Finance China, said that conventional banks could reach this underserved population segment by maximizing staff efficiency, proactive marketing and adopting microfinancing techniques, though she did not specify which techniques. She suggested banks acting on her advice would benefit from low competition and substantial loyalty from an increasingly prosperous customer base [1].

By Matthew Castner, Research Assistant

About PlaNet Finance 

PlaNet Finance is an international non-governmental organization (NGO) with the mission of developing microfinance to alleviate poverty. It was founded in 1998 in Paris, France, and is currently active in over 80 countries.

The PlaNet Finance group is comprised of eight independent for-profit and nonprofit units: PlaNet Finance Advisory Services, which provides technical and advisory services; Planet Rating, a microfinance rating agency; PlaNIS, which specializes in advisory services, structuring and managing microfinance funds; MicroCred, an investment company in microfinance; PlaNet Guarantee, which specializes in microinsurance; FinanCites, a social venture capital company; MicroFit, a microfinance software unit; and PlaNet University, a microfinance training center.

Additional Resources

[1] China Briefing: “Microfinance: The Untapped Chinese Market,” by Sophie Cerny and Jessica Tou, May 13, 2010, http://www.china-briefing.com/news/2010/05/13/the-untapped-chinese-market.html

[2] CIA World Factbook: “China,” July 2009, https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html

[3] SHIBOR: “Shanghai Interbank Offered Rate,” May 21, 2010, http://www.shibor.org/shibor/web/AllShibor_e.jsp

MicroCapital’s Microfinance Universe profile: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=PlaNet+Finance

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