CHINA: Microcredit in China helps women living in poverty to open their own businesses

Poverty-stricken women in China's countryside start up large chicken farms with small loans granted by a local NGO. Microcredit is struggling to flourish on the mainland with the central government still wary of relaxing controls on banks. Feng Shuhua (pron: fuhng shoo hwah) has 6,000 chickens - a fortune in shabby Yanjiagou village in Hebei province, just a few hours drive away from the booming Beijing metropolis. While most of her fellow villagers continue to grow corn and looking for seasonal work as migrant labourers in the cities, Feng is raking in about 50,000 yuan (6,472 U.S. dollars) a year selling eggs to residents in the capital city. Before the chickens came along, her family yearly income was about 3,000 yuan (388 USD). Feng made it happen with a lot of hard work and a loan. She bought her first batch of hens in 2001 with the help of a small loan from a local NGO called Project Happiness - a microcredit programme backed by the State Family Planning and Population Commission to help poor mothers. Like all Chinese NGOs the organisation has ties with the central government. The 4,000 yuan (517 USD) boost - supplemented with an additional loan from a nearby bank - was just what she needed. "The food we eat, our clothes and other daily necessities are all much better than what I had in the past. To tell you the truth, (back then) I didn't have anything like these earrings or a necklace," said Feng. The nation is starting to experiment with microcredit, which has transformed the lives of millions of peasants across the globe, notably in Bangladesh, but has been kept on a short leash in China. China's leaders still see poverty alleviation as a top-down affair. Chinese president Hu Jintao - wary of growing unrest in the nation's vast rural stretches - is pushing for a "new socialist countryside." This includes a whole raft of measures including slashing agricultural taxes and tuition fees for the children of farmers. Project Happiness is a government-approved programme - aimed to mobilise women in the poorest regions of the country. Fifty year-old Yuan Yihua (pron: yoo-ehn yee hwah) is Feng's neighbour. She was also received a 4,000 yuan (517 USD) loan to buy a batch of chickens. "My life has really improved. Now I can afford my son's college expenses which are 20,000 yuan (2588 USD) a year. And I have bought large home appliances, such as a refrigerator, TV set and motorcycle - which also cost me 20,000 (2588 USD) to 30,000 (3883 USD) yuan," said Yuan. But Project Happiness - although it has helped 150,000 women like Feng and Yuan - has serious limitations as a microcredit institution. To begin with, it is more like a charity organisation than a thriving microlending bank like Grameen. Tied to the nation's family planning policy, it only doles out loans to women who toe the line. In Yanjiagou village, that means having only two children. The NGO's provincial head admits the programme is also aimed at softening the policy's image in the countryside, where skirting the rules is common. "We gave support to poor women who followed the rules of the nation's family planning policy - that is where Project Happiness originated. The country may not take into comprehensive consideration the lives of these women. Our family planning system will solve these problems. What we have done is to make up for omissions and deficiencies. It's also an image project for family planning," said Ren Xiezhen (pron: rehn hsee-eh djuhn). Project Happiness relies heavily on donations from individuals and work units in China and Hong Kong. It charges a 3 percent "handling fee" for loans, and no interest. This means it has little room to grow. But analysts say if China wants to close the yawning gap between the wealthy in the cities and the poor in the countryside, it needs proper rural financial institutions - banks where farmers are able to safely borrow money and deposit their earnings. Today these kinds of institutions are still hard to come by. Under pressure to clean up their books, state banks retreated from risky rural lending long ago, using peasants' deposits instead to finance the growth of China's cities. Few farmers manage to borrow from local banks, which prefer to lend to state firms or well-connected clients. With credit tight, peasants have had to turn to illegal lenders for perhaps 50 percent or more of their borrowing. But while there is no institution in China that can touch the success of Grameen bank, the nation is slowly opening a way. Since 2005 a handful of microcredit companies have appeared on the mainland, overseen by China's central bank. But for microcredit to flourish, the government must allow microlending companies to not only provide loans, but accept deposits so they have the means to expand, says Wang Chunguang (pron: wahng chwin gwahng), a professor with the Chinese Academy of Social Sciences. And NGOs like Project Happiness should be handled separately from bonafide microcredit institutions. "For the micro-credit system, the government should open both savings and loan businesses. Savings should not be limited. And the policy of supporting the poor should be distinguished from the microcredit system. Supporting the poor is one thing, while the microcredit system should be market-oriented," said Wang. Today one in six people in Feng and Yuan's county live below the poverty line. There is no doubt the women's small loans have helped give them a leg up out of poverty - the chickens have thrived in their arid village, enriching their families and inspiring their neighbours. And the rest of the nation's farmers could follow, if and when they get their hands on a small loan.

ITN Source | April 21, 2007

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