Microfinance Innovation

The poverty alleviation with credit policy is the important component of the anti-poverty theory, which attracts more concerns of the overwhelming majority of developing countries. To be honest, credit as a financial method that gives an impetus to economic growth has an active effect on poverty alleviation, but it is confronted with secure challenges in practice. First, the poor are on the verge of the formal financial market. The formal financial institutions will refuse to give loans to the poor because of the profit motive as they face the questions such as smaller amount of loans, larger risks, worse credit standing without mortgage, difficulty in the supervision over the use of the loans (because of lacking related information of property and economy) and high management and dealing cost. Second, subsidized loans policy adopted by the overwhelming majority of developing countries brought about the following questions: the leakage of profit was serious, the subsidized loans were often grabbed by the rich and the rate of loan payment was very low. So Adams thought that this policy distorted the distribution of the rural financial resources and prevented the growth of the rural financial market, which, were harmful to the sustainable poverty alleviation and the establishment of the financial order in the poor areas. Therefore, under the condition that the poor are unable to get access to the credit by the two ways of the formal financial institutions and the subsidized loans, they need a new institution called Microfinance.Fighting poverty with institutional microfinance adopts the rules of market economy and makes the institutions serving the poor sustainable in financing. And at the same time, the characteristics of small amount, short term and self-organization by the poor will exclude the rich automatically and assure that the basically targeted groups are the poor. The paper discusses the problems of the credit funds unavailable for the poverty alleviation on the basis of analyzing the relations between credit and poverty alleviation and highlights the innovations of finance, organization and management of microfinance in China with the reference to the successful experience of foreign microfinance. Because our country is in the transition time from planed economy to market economy, the innovation has its own character. (l)From the demand of microfinance, the paper studies the "demand-following" financial innovation from three aspects: transaction institution, transaction instrument and transaction organization and discusses the idea of improving the rural financial market. (2)From the supply of microfinance, it analyzes the innovation of organization and management of poverty alleviation under the circumstances of market economy from three aspects: government, non-government and financial institutions. (3) It makes advice and speculates on the future of developing microfinance that fits our national conditions by combining the demand and supply aspects.