The Sustainability Of China's Microfinance Industry

Microfinance is a new financial service model outside of the traditional formal financial system,targeting the low-income people,providing microcredit, micro-insurance and other financial services.Since the introduction of microcredit in 1993,China's microfinance has formed such a situation that features various suppliers.However,China's microfinance was born in a bad environment that has much policy and regulatory deficiency,and in its afterwards development,it has long been dominated by the government.As a result,the creativity and self-organizing ability of the micro market participants has been suppressed,and most of the microfinancial institutions still can not achieve financial self-sufficiency and organizational sustainability,thus can not provide continuous service to the clients. As we all know,the sustainability of microfinance industry matters much to the poverty-reduction.Inspired by the successful microfinancial model of the foreign countries,this paper uses the self-organization theory to analyse China's financial industry,and try to build a self-organized microfinancial system,believing that during transition to a self-organized system,the sustainability of China's microfinance industry is dean to be enhanced.This paper is structured as followed.Chapter 1 introduces the theoretical basis of microfinance,explores the successful MFIs that have achieved the win-win target in foreign countries,and analyses the reasons for their self-sufficiency.Chapter 2 reviews the developing process of China's microfinance,and makes a supply-demand analysis to the status quo of China's microfinancial market,finding that there exists a big gap between supply side and the demand one,and most MFIs demonstrated insufficiency.Also,this chapter makes a comparison of the sustainability of the microfinance industry between China and the abroad.Chapter 3 uses the self-organization theory to analyse China's microfinance industry,and comes to a conclusion that China's microfinance industry has qualified the basic conditions to form a self-organized system,but still lacked internal dynamics to make the transition.Based on the above analysis,learning from the foreign experience,this paper provides some suggestion to enhance the sustainability of China's microfinance industry.