Microfinance-Driven Comprehensive Services: Innovation Salon on Rural Microfinance

Leping held a salon under the theme of “Microfinance-Driven Comprehensive Services” on May 12th in Beijing. At this event, we invited the Bangladesh Rural Advancement Committee (BRAC), a world-leading NGO on microfinance, as well as other well-known exper

Microfinance-Driven Comprehensive Services: Innovation Salon on Rural Microfinance

Date:  2015-05-18 22:36:44

Leping held a salon under the theme of “Microfinance-Driven Comprehensive Services” on May 12th in Beijing. At this event, we invited the Bangladesh Rural Advancement Committee (BRAC), a world-leading NGO on microfinance, as well as other well-known experts and practitioners from home and abroad to shed light on this issue. The participants fully recognize that microfinance institutes driven by social mission play an important role in China’s rural development. They also reached a consensus that institute should focus on expanding other comprehensive services to facilitate the financial services they provide, in order to truly eradicate rural poverty once and for all.

This salon invites one of the biggest and most effective nonprofit in the world, and one of the three biggest microfinance institutions in Bangladesh—the Bangladesh Rural Advancement Committee (BRAC), to share their operation model and successful experiences on rural development promotion and poverty alleviation through the comprehensive services they provide.

State Council counselor, financial expert from AliSearch and the head of Kai County Minfeng Mutual Benefit Association, among other experts and industry insiders, interpreted the new policies, technologies and businesses of microfinance and comprehensive services, hoping to prepare the institutes for the future development, challenges and opportunities of this industry.

After more than two decades of exploration, China’s microfinance has grown into a “inclusive finance” system consisting of commercial banks, microfinance institutes, Internet platforms and partnerships, which is becoming the mainstay of China’s financial innovation under central government’s call for popular entrepreneurship and innovation.

As the commercial micro-financing institutes’ market segmentation deepens and their services reach more people, it seems we are on the right track to achieve “inclusive finance” as a social mission. However, currently China still has more than 100 million of poverty population, who should be the target group of society-oriented microfinance organizations.

When media and academia are still arguing whether micro-finance is beneficial for the development of our society, international best practices like BRAC and CARD Bank gave powerful affirmative answers by action. These institutions have come to realize financial service can not solve poverty single-handedly, it would only work when combined with other comprehensive services.

Just as the representative from BRAC said: “The cause of poverty and underdevelopment can be very complex, often with more than factors at work, such disease, natural disaster, discrimination, lack of education and lack of financial means. Therefore, single financial services can not really reduce poverty and develop rural areas.” Besides, clients who start business with the loans might also return to poverty again and be worse off because of the heavy burden to payback loans.

Therefore, microfinance organizations such as BRAC and CARD are providing comprehensive services aside from loans (or deposit, insurance and other financial services), according to the challenges and needs of clients. These services include production technologies, distribution channels, health care and so on, significantly lowering the risk of sliding back to poverty and truly improving their livelihood by offering financial tools.

“Except huge poor population, China’s rural areas also have problems like lack of employment, limited commercial and public services, leaving of young labors and so on,” said Dongshu(Jaff) SHEN, Secretary General of Leping Social Entrepreneur Foundation. “Comprehensive services will increase the chances of successful business greatly, and also build value chain for the local community and improve the overall risk resistance and self development ability. ” He added, the key of providing good comprehensive services is to innovate products and services according to the needs of target groups, in order to create synergy between products and services. Currently, the expansion of e-commerce in rural areas, emerging rural entrepreneurs and the nation’s call for popular entrepreneurship and innovation are favorable conditions for providing quality comprehensive services. 

One obvious feature of this “New Normality” is slowdown of China’s economic growth, because of which, some painful structure reform has to be done. Economic downturn won’t be a short-term phenomenon, in which the non-profit sector will be more important, because the underprovided population are going to get the brunt of this difficult time, and nonprofit sector (and social-minded organizations) is should utilize new technologies to mobilize to society, to more widely and effectively cater to the need of self development of the underprivileged.

It is Leping’s mission to create more equal development opportunities by investing and cultivating more social enterprises and entrepreneurs. By the end of 2014, Leping has successfully invested a total of 100 million yuan in 5 social enterprises in microfinance, farmer’s training and employment, pre-school education for children from low-income families, eco-trust agriculture respectively. The companies directly serviced 100,000 people and benefited more than 400,000. Among the 5 companies, Fuping invested 80 million yuan on Shanxi Yongji City Fuping microfinance limited liability company and County Fuping microfinance limited liability company, which served small farms and farmers, provided them with funding for startups and removed the barriers towards better livelihood in the past 22 years. To date, they have provided more than 250 million small loans to around 8,000 farmers, as it innovated their services constantly.

Leping expressed its sincere gratitude to Citi China, who offered technical support and generous donation. Hongjun Teng, Executive Vice President of Citi China said: “We are very glad to support Leping Social Entrepreneur Foundation to carry out microfinance capability building project. Citi China has been closely watching the development of China’s microfinance industry, and Leping has strong innovation and implementation capability in incubating social enterprises. Following central government policy of ‘serving the development of agriculture, rural areas and farmers’ we hope to work with all stakeholders, to help small companies solve their difficulty on technical innovation and financing and explore a new path to empower the rural population in all-around manner.”