Modalities for Microfinance Delivery in Asia and Latin America: Lessons for the People's Republic of China

This paper examines three models that have been used for microfinance delivery in Asia and Latin America, and suggests the best choice among them for People’s Republic of China (PRC).

The paper states that the credit union, NGO and banking approaches have met with success in Asia and Latin America. These approaches are, however, unsuitable for PRC because of the lack of enabling framework and government permission. It suggests that PRC use rural credit cooperatives (RCCs) for provision of financial services, because they:

• Are under prudential regulation;
• Have an extensive network of rural branches;
• Have achieved significant success in mobilizing savings in rural areas;
• Offer savings along with credit and other financial services;
• Have potential for significant outreach because they are located in areas close to where rural poor live and work.

The paper cautions that using RCCs for microfinance delivery might miss serving the poorest of the poor, who might be better served by NGOs or government-supported poverty targeting programs.