Last Friday I found myself mulling over the prospects for microfinance in China, citing especially the promising work of an organization called Wokai, which engages in on-the-ground microfinance projects there, particularly in Inner Mongolia. Shortly after posting these reflections, I received a message from Wokai's Marketing Director who, after a lovely brief introduction, writes the following:
[...] To answer your question about how well microfinance can work in China, I'd like to refer you to this recent article from China International Business magazine: http://www.cibmagazine.com.cn/Features/Economy.asp?id=782& giant_steps.html On an individual level, microfinance in China has increased incomes and improved the status of women. However, its impact on a national scale has been limited by legal regulations.
The article she cites is actually quite brilliant, and goes a long way in addressing the regulatory and legal hurdles faced by the microfinance industry in China (indeed, the logic underpinning my hesitation to wholly embrace the potential success of this industry). While the Chinese government granted official status to microcredit and microfinance companies in 2008, this has seemingly done little to ameliorate the challenges faced by microfinance NGOs (sneaky, sneaky), who must now transform themselves into regulated financial institutions. Microfinance in China is permitted to operate, then - and by the look of things, succeed - so long as it falls under the auspices of the state.
Particularly prominent in China are "village banks," which provide individuals with microcredit loans and other microfinance services. While it's too early to gauge the actual effectiveness of these institutions, the prospects do appear promising. To answer my own question, then, it would appear that microfinance might actually work quite well in China; that is, of course, so long as the industry has a cooperative state by its side.