Talk microfinance, philanthropy over drinks

Wokai regularly holds similar events. Photos provided by Wokai.org

By Annie Wei

Some 50 people gathered at D-Lounge in Sanlitun, Tuesday to discuss microfinance, philanthropy, and corporate social responsibility over drinks. The event was hosted by Wokai, a US-based microfinance organization that provides small loans to impoverished Chinese citizens.

Some of the attendees wanted to join Wokai’s roster of volunteers; others were curious about theorganization that has attracted media attention both in China and the US. Many were inspired by Muhammad Yunus, a Bangladeshi economist, who established a bank that provided small loans to the poor on safe terms so they could help themselves. Yunus was awarded the Nobel Peace Prize in 2006.

At the gathering, Sara Jane Ho, Wokai’s Asia business development associate, compared the development of microfinance in China to thatin countries like India and Bangladesh. She also talked about how Wokai helps farmers in Inner Mongolia and Sichuan, and the challenges of running a foreign nongovernment organization in China.

Calvin Chin, founder of Qifang, an organization that provides student loans, was a guest speaker and fielded questions about the trust issue between students and loan givers. Chin said Qifang does background check and verifies personal information through the borrower’s school, and that the loans are given directly to the school to prevent misappropriation of funds.

Wokai was established in 2008 by two American women who studied in China and wanted to help the country’s 200 million citizens who live on less than 7 yuan a day. For more information about Wokai and Qifang, visit wokai.org and qifang.cn.

Charity that earns money – Alibaba and Grameen to launch microfinance for startups

By Huang Daohen

“Money and wealth are two different concepts,” Jack Ma, the founder of Alibaba Group, told his 15,000 employees at the company’s 10th anniversary earlier this month.

“If you have money but have not used it to elevate your own or other people’s happiness, then you may very well only possess a lot of symbols and a mountain of very colorful pies of paper.”

Ma is backing up his words with action. On September 24, Ma unveiled his plan with Muhammad Yunus, the Nobel-winning founder of Grameen Bank, to launch a program that provides microcredit financial services to the poor for startup projects.

Desperate for loans

Zhou Xiulian, a woman from a rural area of Sichuan Province, has recently become quite worried about her business. Zhou, 26, runs a duck factory and has been desperate for a loan to continue her business. She constantly updates her loan request at wokai.org, a lending Web site, but has so far come away frustrated.

Zhou is typical of most rural women in remote areas. When she was 18 she got married to a man of the same age in the village. The husband’s family lived with them and put them in debt, so the young couple had to become migrant wokers. Zhou said they had been to Guangzhou and Shenzhen becoming arriving in Beijing.

After four years, they managed to pay off their debt and were able to save a little money to start a duck business back in Sichuan. Zhou bought a number of ducks, but after three months, due to unpreventable circumstances, they were all dead.

Zhou had to return to Beijing to work, while her husband tried to get support and money to restart their business.

There may be hope for the couple now, with Alibaba joining Grameen Trust of Bangladesh to start the Grameen China initiative.

The loan project will provide microcredit financial services to the poor to launch startup businesses. Grameen China’s initial focus wll be in Sichuan, which is still recovering from a devastating earthquake last May, the company said.

The poor’s bank to open

According to Alibaba, the company will donate $5 million (34.1 million yuan) and technical support to help loan recipients eventually run their businesses online.

Grameen China will be a social business. Initially, it will establish two Grameen Microcredit Companies in Sichuan and Inner Mongolia, with multiple branches in each area. The branches will be staffed by local employees recruited, trained and supervised by Grameen microfinance experts.

It expects to begin making microcredit loans available as soon as it receives regulatory approval from local authorities.

At the initial level of funding, Grameen will give loans to more than 8,000 people in Sichuan and Inner Mongolia, with the average loan starting at $400 (2,731 yuan) per person and growing to $4,000 (27,312 yuan) within the first five years of operation.

With additional funding partners, the number of loans made will more than double, the company said.

“We are at the beginning of an Internet-driven revolution where small businesses around te world will be able to compete with larger companies for customers like never before,” Ma has said. “Microcredit is the oxygen to make entrepreneurial dreams come alive. By helping people make money, we are making money.”

Although Grameen Trust has been active in China since 1995, this is the first time the Bangladesh company will directly implement a microcredit program in China.

“We are pleased to spread the Grameen Bank approch to help the poorest people by giving them microfinance to alleviate their poverty through the creation of small businesses,” said Yunus in a letter to Beijing Today.

Yunus said the partnership with Alibaba will help Grameen China use information technology. Alibaba’s main site, Alibaba.com, provides a platform for small business owners to buy and sell everything from raw materials to iPods. The group also runs the country’s top oine payment platform and Taobao.com, a user auction and retail site.

“If we can make microcredit available to potential entrepreneurs n China, then that will make a big impact for the whole world,” Yunus said.

Microcredit will work

The concept of lending small, unsecured amounts to the poor can be applied to China, said Zhao Xiao, a pioneer of microfinance research and practice in China and also a professor at the University of Science and Technology Beijing.

The business model, called microcredit or microfinance, could develop quickly in China with government support and benefit many poor people, Zhao said.

“It’s not charity. It’s business that can earn money and also help lift the poor out of poverty,” he said.

In China, conventional banks have no interest in household credit in rural areas because of high repayment risks and operational costs. Thus, rural productivity has been hampered by a lack of access to reliable and affordable credit to purchase production tools.

Zhao said some pioneering institutions, mostly overseas organizations, have experimented with microcredit in China for 10 years, but without results.

“They are not sustainable because of policy and legal restrictions and insuficient funds,” he said.

Currently, there are seven private microcredit companies in China that face the same problem, as they are only allowed to provide loans but cannot accept deposits.

Zhao said not allowing microcredit companies to take deposits would greatly hinder their development.

But still, microcrdit would work if the government perfects a proper legal environment and supervision mechanism, Zhao added.

Microfinance

Microfinance companies provide loans to small businesspeople who often cannot meet the strict credit requirements of large banks. Either these people do not have the capital or the cash to back the loan, or as the large banks argue, their credit needs are too small.

With banks out of the picture, microfinance steps into the role usually held by relatives and often predatory money lenders. Microfinance is most often associated with the developing world, but agencies have begun working in industrialized countries.

Grameen Bank, the world’s first microfinance institution, was created in Bangladesh in 1983 by Mohammed Yunus, an economics professr who launched it to help alleviate rural poverty by providing much-needed funds to entrepreneurs. In 2006, Yunus won the Nobel Peace Prize for his efforts. By 2008 Grameen Bank had lent $7.6 billion (51.9 billion yuan).

Official statistics show that people in rural areas have less access to financial services than their urban counterparts. At present, 228 million rural households who need bank loans are unable to access them.