The Government-Run Labor Union Explores Micro-finance

As the global economy turning sour, many laborers lost their job in factories and have to return home. In Chinese media, there have been discussions on whether those laborers deserve some kind of welfare benefit, such as unemployment or severance.

Right now, their status falls through the social safety net: their residence status say they are peasants, or 农村户口，and they are likely back in the countryside already. Therefore, their old employers, and the government(s) in the city or province where they used to work, are reluctant to sign on to some kind of compensatory plan. Yet the local governments in rural areas mostly don't have the resources to help them either.

In the context, there's been reports (e.g. 工会将开展小额贷款担保试点帮助农民工创业) recently that the government-run Labor Union will start pilot programs where the Union will offer guarantee on small loans for enterprising former laborers now back home.

Whether the Union is qualified to play such a role is uncertain. However, I have no doubt this is a worthwhile experiment.

Here is an excerpt from the article:

针对金融危机中受到影响的农民工，全总将从５亿元中央财政困难职工帮扶专项资金中拿出一定比例，用于农民工就业援助和帮扶服务，并要求各地方工会也要加大投入，相应配套资金用于农民工援助行动

The Growing Ethnic Media Presents New Marketing Opportunities for Wokai

NPR's Morning Show has a piece on the tremendous growth of the ethnic media amidst traditional media slump. For example, L.A. has a Asian radio station that has a large following. One of the people being interviewed said, "it is really hard and tricky to capture the second generation" because they are multi-culture, multi-lingual and multi-media. And, I reckon, have a very fluid identity.

Although those new media channels offer a ready audience, it is also a challenge for marketers to find a way to connect to this newer generation of ethnic audience.

My guess is, this audience is more interested in topics related to their ethnic background. But they don't necessarily subscribe to the same view of the older immigrants.

Therefore, I think Wokai should focus on using China to capture this audience's attention but to communicate to them in languages they are familiar with.

Help needed: write to NPR and Ms. Melissa Block So She Will Cover Microfinance Efforts in Sichuan

For those NPR listeners, please take a minute to write to Melissa Block, so she will cover microfinance in helping the earthquake victims!

Background: Melissa Block is the host of the most popular NPR program, All Things Considered. She was reporting live in Sichuan province when the earthquake struck. She did a wonderful job of reporting the damages from the quake and the rescue efforts.

Now she is going back to Sichuan again, to follow up on life in the quake zone. A couple of weeks ago, when she announced her plan on air, she asked for the audience to submit questions, suggestions on what they like to hear most.

If you are a Wokai supporter, or someone follows microfinance in general, I urge you to write a brief letter to NPR and Melissa, asking her to take up the topic of how microfinance helped the quake victims?

I hope by urging NPR to discuss this topic in ATC, we can effectively raise the awareness of microfinance in China. Whether Wokai is mentioned directly or not, we will certainly benefit from a potential surge of interests.

Here is what you can do:
1. Go to: http://help.npr.org/ics/support/default.asp?deptID=5670&task=ticket
2. Fill out your name and email
3. Click on the following choices:

• a. I want to "Send a question"
• b. I have a question about "Something I heard"
• c. Show: "All things considered"

Make sure you start your "Subject" line with "CHINA".
In the message body, you can briefly state your interest in "how microfinance helped earthquake victims in Sichuan"

You may also suggest the producers to contact Wokai or our field partner in Yilong county: The Association for Rural Development of Yilong County (ARDY)

Other tips:
Recently, Danone, the French food company, has just launched a $3 million microfinance fund for the quake victims. Dr. Yunus himself attended the inception ceremony. See my previous article here.

That is all!

Thanks!

Mao Yushi, the Famed Chinese Economist, Shares His Thoughts on How to Structure MF Programs to Fight Poverty

Mao Yushi, 茅于轼, is a well known economist in China. He was among the first in China to advocate using micro finance to fight poverty.

In my eyes, he is a scholar who believes the power of the "Invisible Hand" and has a strong conscience of social justice as well. Recently, he was ridiculed by some pundits for saying that an economist should be "vouching for the Rich but working for the Poor" (为富人说话，为穷人办事)

It is not surprising that Mao sees the power in micro finance.

Here is an interview of Mao (当务之急是地下金融合法化) where he further articulated his thoughts and position on micro finance, private capital and what the right state policy should be:

农村小额贷款这一块主要的问题是对股东的要求，它要求每一个股东只能参与10%，而且这10个股东互相还不能关联，那就是说这10个股东互相都不认识，这个事怎么办得通啊？

现在有一个特别之处就是小额贷款公司是在工商部门注册的，不是金融注册。工商注册规定只贷不存，

就算出事，几百万，甚至一千万，也影响不了大局的。不会像以前那些大国有银行出现几十个亿、几百个亿的不良资产，这些地下金融没有那么大的本事。

这次金融危机，我们应该把各方面的潜力充分发挥出来，对付金融危机，比如说现在回乡的农民很多，... 农民回去之后，这些人中有一些人想创业，但是没有资本。像这种情况，我们的小额贷款公司就可以帮他忙。

Danone, the French Food Company, Launches Micro Finance Fund to Help Sichuan Earthquake Areas

达能小额信贷项目启动 四川地震灾区农户受益 (2009.3.11)

The above article tells how Danone, the French Food company (yeah, that Yogurt brand), started a Micro Finance Fund in China.

The fund targets the Sichuan earthquake infected area, aiming to help the victims to rebuild their lives with micro loans.

Danone injected about $2.8 million into the fund.

Dr. Yunus, the founder of the Grameen bank, was present at the inception ceremony.

China Contemplating Loosening Capital Requirements on Private Lenders

A friend of mine forwarded this article: 地下钱庄阳光化提速《放贷人条例》只待共识

In short, China's central bank has a team drafting a "Lender's Law" in order to establish a legal frame work to regulate private lending.

The main contention is at source of capital for any lending institution: who can raise from where?

• 条例的最大突破是允许个人注册从事放贷业务
• 相对吸收公众存款的银行类金融机构而言，监管较宽松，
• 允许放贷人除自有资金之外，... 甚至可通过发行债券、股票等方式募集资金。
• 对放贷人的贷款利率上限管理更加灵活，规定不高于同期同类贷款基准利率的四倍。

Industry insiders say:

《放贷人条款》的融资渠道显得极为宽松 ...

民间金融机构也担心放贷人条例出台之后，监管者会限制其放贷利率，进而影响收益。

典当业界一位人士对该条例的迅速通过表示悲观

This law is not specific to MF but certainly has impact to the industry:
1. It creates a transparent legal framework (better than ad hoc policies)
2. However, too tight a restriction on raising capital or lending rates may limit hamper MF institutions

China Established Its First Micro Finance Industry Group in 2005 中国成立第一个小额信贷机构的全国性行业组织

Contrary to my own mis-perception, China has a long history of micro finance. As this previous article documents, micro finance (小额信贷) in rural area was first introduced to China in the early 1990s. Ever since then, there is constant pressure on the government to liberalize its policies on rural credit unions and banks.

This article here provides another sign of a growing industry: as early as 2005, China established the first MF industry group 中国小额信贷发展促进会. Although the effort was led by the Commerce Ministry, the advocates of this group clearly think that in order for MF industry to grow, the government has to loosen its regulations.

目前中国的农村小额信贷规模共计2200多亿元人民币，主要由半官半民性质的小额信贷机构、农业和农村合作社三部分组成。

目前民间小额信贷机构控制的约10亿元规模中，不同地区的机构之间，经营业绩和命运相差悬殊：既有贷款收回率100%的，也有不到10%的，更有不仅贷款收不回、机构最终也关门大吉的。

“造成这种现状的原因很多，但一个共同的现象是，与当地政府的干预程度成反比。即干预程度越大，经营效果越差。”

目前小额信贷的发展，面临“政策瓶颈”。...

目前，浙江等地区的一些民间资本和城市资本，频频向小额信贷机构表示参与意愿。但按照目前政策规定，这种参与方式显然属于非法金融。