Poverty Reduction And Financial Sustainability Of Microfinance In China: Conflict And Management

Microfinance is a new financial system arrangement which is different from thetraditional formal and its purpose contains rescuing the poor and micro-enterprisewho cannot achieve financial services from the formal financial institutions. In virtueof the operation of the micro-finance, most of the micro-finance institutions cannotachieve sustainable development, or if it makes micro-finance business, the target themicrofinance sets will deviate from the original orient. The conflict between povertyreduction goals and financial objectives of sustainable development is difficult tocoordinate. So how to balance the dual goals of microfinance is a major issue inmicrofinance field. For Chinese micro-financial institutions, do they have any conflictof the dual goals? What are the factors of the conflict? How to administer it underthe dual goals for the microfinance? The resolution of these issues will have greatsignificance for China; of course it is the main content to study in this paper.Firstly, the theoretical knowledge of micro-finance will be discussed in the paper.It included the basic concept of the micro-finance and the classifications, thedevelopment vein of the micro-finance, the definition of a micro-finance sustainabledevelopment and proposed some indexes for assessing the sustainable development ofmicrofinance system. Moreover it analyzed the possibility of micro-financialcoordination of the dual goals. Secondly, it described the present development statusof Chinese micro-finance and analyzes the institutions operating efficiency of thevarious types of micro-finance. In the fourth chapter, it discussed and researched theconflict between the poverty reduction and sustainable development by the factoranalysis method, and the empirical results showed that the conflicts had emerged. Inthe fifth chapter, it analyzed the reasons for causing this conflict in China, then itshowed the main reason that there won’t be an effective solution to deal with the“high cost, low income, high risk” model in the rural credit market. The policyrecommendations will be proposed lastly, and this paper consider that in order toeffectively reduce the conflict between the dual goals, the government should expandfinancing channel of the micro financial institutions,strive to innovative microfinanceproducts and mechanism, and meanwhile strengthen efforts to support governmentdepartments.