Brief Introduction to China Association of Microfinance
China Association of Microfinance is also referred to as CAM for short.
CAM is made up of domestic MFIs (Microfinance Institutions), national and international institutions and individuals who are interested in and supporting the microfinance industry. It is a cooperative and self-disciplinary organization working under national laws, policies and guidelines to facilitate the development of the microfinance industry.
CAM’s vision includes promoting governmental supports towards microfinance, strengthening international cooperation in microfinance, strengthening industry self-discipline, enhancing management capacities of MFIs, raising funds for microfinance development, providing financial services to populations living with poverty and low income, and contributing to the social objective of building an all-round, well-off society.
Background to CAM’s creation
I. Current development status of microfinance
Microfinance in China started in the early 1990’s with support from international project aids and has now increased in scale after more than ten years of pilot experiments. The first pilot MFIs have made very positive contributions to the development of China’s microfinance industry. Firstly, they have motivated China’s governmental authorities to use microfinance models in a wider scope for poverty alleviation and employment of urban laid-off workers. Secondly, the system innovation by microfinance prompted a reform of some banks and non-bank financial institutions. The Rural Credit Cooperatives (RCC) followed the examples of microfinance and started rural household credit loans and group guarantee loans. Thirdly, they have prompted adjustments of banking policies and the development of financial markets. The PBC (People’s Bank of China) and CBRC (China Bank Regulatory Committee) have now started on new attempts to experiment on MFI’s new establishment.
According to international practices, only sustainable microfinance can provide better financial services to the vast populations living with poverty. However, unlike other countries, large scale and sustainable microfinance institutions have not come into being in China. Existing microfinance institutions in China do not have legal status and financial self-sufficiency. They are small in size and hard to expand; harsh challenges of surviving and developing are facing them. This is mainly because of four factors:
1. The institution governing structure is in disorder, ownership systems are ambiguous, management style has too many varieties. The institution, suffering frequently interference from government authorities and other organizations, does not have an independent business right.
2. The existing MFIs’ managing capacities are insufficient; they lack proper credit management systems and professional credit managers.
3. Industry standards in the field of microfinance has not come into being. Every institution keeps their information undisclosed and effective supervising mechanisms are insufficient.
4. The early pilot MFIs are treated as alien organizations and are kept out of the banking system, so there is neither legal business right nor financing channels available to the MFIs.
The PBC started new experiments for commercially sustainable MFIs in 2005, the CRBC also will publish administrative regulations on these institutions. However, these policies have not solved the development difficulties facing existing MFIs; neither do they provide any practical industry guidelines for new MFI’s establishment.
The development of China’s microfinance industry will need a network providing services for both existing and new MFIs.
II. Necessities on creating China Association of Microfinance
1. The existing MFIs need to unite and talk to governmental decision making authorities to seek a better policy environment for development.
2. International experience shows that an industry standard is needed for MFI’s continuous improvement of management and business achievements. This work will need intermediate agents.
3. Before the MFIs, especially existing ones, are integrated into the banking supervising systems, a self-disciplinary organization is needed for coordination, statistics and information disclosure for healthy development. Even if the integration inscompleted, intermediate agents will also be needed to assist the supervising institution’s work.
4. As a financial innovation, microfinance needs to consequently sum up and exchange experiences as well as lessons learned. Information sharing will facilitate the whole industry’s development, therefore a intermediate agent is needed for a information platform.
5. Due to defects in its own capacity, the MFIs will need constant technical support and trainings from professional institutions.
6. MFIs will need professional funds raising service.
Functions and Missions of CAM
1. Policy coordination: by seeking policy environment enhancement through policy study and discussions and providing policy instructions;
2. Profession self discipline: assisting national banking administrative in statistics on MFIs, disclosing of information, creating of industry standards, compiling of management guides, evaluating and ranking of the MFIs;
3. Information exchange: exchanging of information and personnel and relevant service;
4. Technical support: providing technical support and training to MFIs in order to enhance their management level;
5. Fund raising service: through wider cooperation with domestic and overseas supporting and investing institutions, attempting to raise more development funds for MFIs.
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