A Case Study Analysis of the Impacts of Microfinance Upon the Lives of the Poor in Rural China

This paper presents a case study approach to investigate the impact of microfinance upon the lives of the poor in rural China. The study methodology was:

• Undertaking field research in a poor central-Chinese village in which a microcredit program had been running for seven years;
• Contrasting the socio-economic changes that had taken place here with those of a nearby non-program village.

The study found that the program has led to several positive impacts on the lives of the borrowers:

• Increased self-satisfaction and economic security;
• Three times faster increase in village-based incomes of borrowers than in those of non-borrowers;
• Fastest rise in poorer borrowers' incomes;
• Reduced wealth disparities among borrowers;
• Borrowers' reinvestment of the greatest proportion of profits back into income generating activities.

As per the study, the wider impacts were:

• Improved living conditions, increased spending on education and health and an enhanced sense of well-being;
• Reduced number of villagers migrating to find outside work;
• Lessened burden on women;
• Fewer incidences of negative social behavior, which was attributed to people being less idle as a result of greater economic activity within the village.

The study concludes by:

• Challenging the common perception that microcredit programs need to tailor repayment regimes to individual borrowers' income profiles;
• Arguing that they should instead be tailored to the unique socio-economic characteristics of Chinese villages, in particular by using existing social networks, in order to optimize program effectiveness.