The Reseach On Operating Efficiency Of Microfinance Companies In Zhejiang Province

Microfinance originated from Bangladesh in the1970s, which was then rapidly introduced to many other developing countries in Asia, Africa and Latin America, has became an highly effective way of helping people under poverty. After it was introduced into China in1990s, great efforts have been put into the development of this business mode, together with lessons learnt from successful experiences of foreign countries, to benefit the rural populations and people under poverty. In2008, China began the trails of microfinance companies all across the country.The study of microfinance begins early in other countries, and there are extensive researches on the efficiency of microfinance companies. In China, researches on microfinance are just starting to tackle the classification of organizations, methods of organizing them, positioning in the market and customers, and sustainable development of the microfinance agencies. There are some quantitative studies, but comparing to similar studies on the efficiency of microfinance organizations done in other countries, they begin at a relatively late time, and are less systematic and less extensive. Therefore, further analysis and discussions based on current researches will not only be important for theoretical studies, but could also could provide valuable suggestions to both the related governmental agencies on improving their polices, and microfinance companies on boosting their efficiency. The present work studies microfinance companies in Zhejiang. First, we analyzed both the situation and features of their operation, calculated their efficiency using Data Envelopment Analysis (DEA) method, and did a quantitative analysis on the situation of microfinance companies in Zhejiang. Then, based on these results, we analyzed the factors that affect the efficiency of these microfinance companies by using the Tobit model. We found that their efficiency has no explicit correlation with both the ratio between microloan in the proportion of the total loans and the percentage of bad loans, however, it is proportional to the interest rate and the ratio between loan remaining owner’s equity and bank financing. Finally, based on both the quantitative and qualitative analysis, we summarized both the advantages and disadvantages of microfinance companies in Zhejiang, and provided suggestions for both the microfinance companies and the policy makers.Our study indicates that, in order to improve the efficiency of microfinance companies in Zhejiang, the companies themselves need to first develop multiple techniques of small-amount-loan suitable for microfinance companies. Second, to build up high quality personnels. Third, to focus on their own local area, make more accurate positioning of their market. Fourth, to learn from banks on financing, enhance their own management and innovation. For the policy makers, they should first define the nature of microfinance companies as financial establishments as soon as possible, amend related policies from the top. Second, they should relax the restrictions on the bank financing of microfinance companies. Our study have the following features:first of all, the content of our study is new, it is about the operating model of microfinance company and how to provide guidance for its sustainable development through both administrative supportive policies. Second, our perspective is relatively unique, which is starting from the operating efficiency of the companies, looking for the elements which have effects on the operating efficiency. The data we use are the first-hand from2012, which is up to date. The inadequacies in our study are that there are relatively few related studies, and also a lack of refining of the results based on fundamental theories. This set of data is also not perfectly inclusive; only the data of microfinance company in Zhejiang in2012was analyzed, therefore no comparison between data from different years, which make it impossible to reveal the progress of this industry since its trial operation. Our study and conclusions may provide useful guidance to relevant governmental agencies on improving their policies, and also to microfinance companies on how to operate with higher efficiency.