Serving the Low-Income Group with Microfinance in China

This paper demonstrates that micro-finance, initiated by government and reinforced by industrial initiatives, can contribute to serving the low-income group in China. In previous studies, micro-finance is considered an effective method to alleviate poverty, if it can be integrated with some innovative initiatives, by MNCs or by social entrepreneurs, to serve the poor. However, how micro-finance, initiated by government, can help the low-income group in the 'big government' context has not been effectively addressed in the literatures. An exploratory analysis, involving interviews with micro-finance providers and low-income population, original case studies, and archival material, indicates that the micro-finance models in previous studies, as presented by Grameen Bank, may not be suitable in the context of China where a strong government plays important roles in social life. Results suggest that the success of micro-finance initiatives targeting low-income markets is enhanced by the activities of integrating low-income group into the value chain of local economy. Building on the findings of case studies, the paper presents studies which demonstrate how the so-called "Company+Farmers+Micro-finance" mode and "Government+Company+Farmers+Micro-finance" mode succeed in creating social and economic development in underdeveloped area in China. The findings suggest that micro-finance need to cooperate more with local firms to find some Win-Win business model in underdeveloped areas, in order to help the low-income group get out of poverty.