A Case Study That Measures the Success of a Microfinance Program in Henan Province

I found a case study that measures the success of a microfinance program in Henan province.

The case study followed a microfinance program run by a government agency, China Poverty Alleviation and Development Center, in the late 1990s and early 2000s. The program covered one entire county in Henan province and was designed to closely follow the Grameen Bank model.

The follow-up survey shows measurable change microfinance has brought about in peasants' life. It also reveals several areas that need improvement.

When the success is measured by the sustainability of a microfinance program and the positive change it brought to people's life, the report leaves little doubt that microfinance is a viable and effective tool in reducing poverty in rural China.

For example, since 1996, the program grew at an annual rate of 46%, borrower base grew at a pace of 39%. Loan turnover rate was 1.69 (times lent out in a year).

An agent on average managed 255 borrower's accounts, average total loan amount was RMB 190,000 (1996 RMB), or roughly RMB 745 per account. The profit from the program more than covered operating expense (even after remitting some profits to government agencies, it still covered 96% of expense).

The change this program brought to the community and individual borrowers is obvious:
In three sample villages, in five years between 1996 and 2001, 2.5 times more people (257/96) lived on incomes other than farming thanks to help from this program. Average per per capita income grew from RMB 700 to RMB 1500. Nonfarming small businesses grew from 5 to 12 (10 out of the 12 benefited from micro-loans). Rates on loans offered by private lenders lowered by 2% (from 20% to 18%). The number of automobile purchased nearly tripled (from 3 to 8).

When comparing individuals who benefited from this program with those who did not, the study compared several indicators (such as monthly household income, asset stock, number of household appliances), the former all come out clearly higher than the latter group.

The study also reported some of the problem came out of the program. Such as high operating cost, lack of complementary support to peasants who started businesses, lack of focus (the program was constantly torn between conflicting directives from operators and government sponsors), and lack of resources (capital, experienced staff and other support infrastructure).

The report, 河南虞城扶贫社小额信贷扶贫案例, can be found at here.

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