Zhan Gao, the co-founder of Grameen China, once shared his understanding of how this bank would help, "Lasting peace couldn't be achieved only if people found a way to emerge from poverty. The Grameen Bank model established by Mohammed Yunus offered a solution. It is highly transparent and integrated. Its unique group and center meeting mechanism can effectively promote the low-income women to expand social networks, thus cultivating social capital. Grameen China is pursuing its long-term goals to break the vicious cycle of poverty."
The founder of Grameen——Mohammed Yunus | Source:Web
As an innovative microfinance model, Grameen Bank has efficiently alleviated poverty in Bangladesh. According to the latest data of the Bangladesh Bureau of Statistics, the absolute poverty rate in Bangladesh decreased from 82% in 1972 to 11.3% in 2018, with the joint efforts of the government of Bangladesh, Bengali, and the Grameen Bank.
Yunus's "social enterprise Empire" in Bangladesh| Source: Web
Such a financial model has also been widely promoted and copied worldwide. Replicas of the Grameen Bank model operate in more than 41 countries, including the United States, Mexico, and Turkey, benefiting 16.88 million low-income families worldwide. Thus, it proved to be a sustainable and effective model in the fight against poverty on a global scale. The Grameen Generalized System (Grameen Bank II) is also a reference for the global microfinance industry. The Grameen model has been imitated in more than 110 countries worldwide.
Guiping Liu, deputy governor of the People's Bank of China, said that the Grameen model had changed the traditional prejudice that "the poor lack credit and cannot manage funds," which shows that as long as the system is scientific and reasonable, the poor groups can also maintain good credit after obtaining the initial funds for development. Microcredit has been acknowledged as the basis of sustainable development under certain conditions. It has been used for reference by many countries and further evolved into a microfinance model, which has become a common poverty alleviation practice in developing countries.
In December 2014, Professor Yunus, the founder of Grameen Bank, visited Lukou Village, Jiangsu Province, China, to officially launch Grameen China. It marked the first step of its involvement in the poverty alleviation sector in China. Up to August 20, 2018, the Grameen Bank system has helped 3,200 families and more than 2,000 women members start their businesses in seven projects in China. What's more, Grameen Bank has issued 52 million yuan of loans with a loan repayment rate reaching 99.3% in these years.
Grameen China Lokou sub-branch was established | Source: sohu.com
The status quo of Grameen China
Grameen China works with Chinese commercial banks and NGOs to provide financial services to women in need. On January 15, 2019, the Grameen-China Construction Bank Financial Innovation Lab was officially unveiled in Shenzhen. The Chairman of the China Construction Bank, Guoli Tian, came to the scene and issued a quota of 10,000-20,000 yuan to the first 12 women from Shenzhen of non-collateral micro-loans.
Microfinance | Source:Web
One of the recipients, Ms. Qin, from Maoming, Guangdong, had long been divorced and raised three children alone. She said that Grameen made her feel that she had not been wholly abandoned. She stated that Grameen Bank allowed her to regain her hope in life, as she used to make a living by being a street vendor with a volatile daily income.
More banks are paying attention to the Grameen model and seeking cooperation in China. "With the coordination of Beijing Financial Work Bureau, the tripartite cooperation projects of Beijing Financial Holdings Group, Bank of Communications and Grameen will soon be launched in Beijing; at the same time, other large state-owned banks and joint-stock banks are also contacting us, willing to cooperate with us in poverty alleviation through education, credit card business, and other aspects." Ge Qingzhen, the Foundation for Yunus Social Business China consultant, said.
In the past few years, Grameen China has also achieved some success. "Fudian-Grameen Poverty Alleviation Loan Project" is one of the representative projects.
Taiyi Yi ethnic township is the only township in Dali City located in the mountain area and the only impoverished township in the city. There were five impoverished villages and 2415 people in 565 registered poor households. It was the main focus for Dali city to fight against poverty. In 2017, the whole township emerged from poverty, and five poor villages were removed from the poverty list in 2018. In 2019, 2415 people from 565 registered poor households were lifted out of poverty.
Taiyi Yi ethnic township | Source: chinanews
The project provided women from low-income families with a loan of 20 thousand yuan. This micro-loan has low or no interest, and housewives would monitor its use to lift their families out of poverty through specific productive activities. The project also enabled members to obtain more information and skills related to production and living by establishing mutual assistance groups and centers. At present, the project has successfully granted 14.325 million yuan of poverty alleviation loans in Taiyi Township, and 335 families have received loans.
Three years ago, Xiuying Li from Dapingdi Village, Taiyi Township, loaned 20 thousand yuan through the "Fudian-Grameen Poverty Alleviation Loan Project" to start her breeding industry. She bought a few piglets first and then used some funds to plant zanthoxylum bungeanum and Paris polyphylla. Two years later, Li Xiuying lent another 20 thousand yuan to continue growing and breeding and gradually became better off. In 2019, her yearly income reached 6,165 yuan.
In the past, the primary source of income of Xiuying's family could only rely on her husband, who went out to work, while she grew corn at home. Her annual revenue has exceeded that of her husband, who worked outside, through her efforts. In her words, "women hold up half the sky. More importantly, life is more and more prosperous."
The Yi ethnic group | Source: www.sc.xinhuanet.com
Yongjian Duan, a staff of the Dali branch of Fudian Bank in Taiyi Yi Township, said that it is impossible to use the traditional bank microfinance business to help Taiyi Township fight against poverty. Conventional bank loans need land fixed assets, stable income, and collateral, but farmers don't have those. So, they can't borrow. The difference between the "Grameen" model and the traditional loan is that it does not need a guarantee or mortgage. Poor women can apply only by providing ID cards and household registers and can successfully obtain the loan after verification by the bank project department.
The challenges for Grameen China
However, in the process of practice, Grameen China has also encountered internal and external localization challenges.
In terms of external challenges, Yunus believed that, like other countries, most of China’s banks served the rich, not the poor. “What we want to create is a bank that serves the poor. To create a bank like Grameen, the premise is to legislate and allow the birth of a bank for the poor.”
Financial Products | Source: Bing
In terms of internal challenges, lack of talents is the primary internal reason restricting the Grameen model to its full potential.
The Grameen Bank staff need to receive half a year’s training before taking the post and are required to have a university degree or above, in which center manager requires a graduate degree or above. In China, the proportion of university graduates willing to return to rural areas may be lower than expected, whereas the cost of training is even higher.
Leadership & Management | Source: Bing
The Future of Grameen China
From Bangladesh to China, the gap Grameen China needs to cross is the geographical boundary, the cultural difference, and economic and technology challenges. Grameen China will be confronted with more challenges in organizational management, operation, etc. Grameen and its Chinese partners are working together to determine whether Grameen can find suitable conditions for development and realize its vision of helping the disadvantaged group in China.
Yunus indicated that "Grameen is overstaffing, out of date and inefficient. This is an inevitable process, though. Some institutions become out of date three years after their establishment, while others only have this problem 50 years later. It would help if you designed your path. If your organization is outdated, it will be replaced by a more dynamic and efficient organization, just as MacIntosh threatens IBM computers. This is natural. But when the two companies compete, the computer itself still exists. It's not the institution that matters, and it's the service."
In fact, during the 20 years' development of Grameen China, it has been actively trying to promote cooperation with other institutions. Since 2018, Grameen China and CreditEase have launched pilot cooperation in Lukou, Jiangsu Province, to help low-income women start businesses and emerge from poverty. By the end of September 2019, a total of 980 thousand yuan of financial support had been provided to local rural women, supporting 50 farmers in total. In June 2019, Grameen purchased hospitalization medical insurance for 32 local rural children.
Now Grameen China and CreditEase are exploring a new way. In October 2019, Grameen China and CreditEase signed a strategic cooperation agreement at the "CreditEase Family Succession Summit" held in Xiamen. They planned to launch comprehensive cooperation in the provision of credit funds, public welfare services, allocation of available welfare assets for high net worth people, the construction of Grameen China outlets, internship and study tours for children of high net worth customers, etc., benefiting more low-income women in need, and further promoting the continued growth of public welfare finance.
Signing ceremony of strategic cooperation between Creditease and Grameen China | Source: sohu.com
At present, although the government has generally solved the problems of clean water, public health, and other infrastructure in poor areas, a large number of the urban migrants do not have access to proper loans, and the poor still have unfulfilled spiritual and psychological social needs, which signifies Grameen China.
"Grameen Bank has set up four outlets in Ankang City, Shaanxi Province, and has accumulated 50 customers in the first month." Gao Zhan cited this data to illustrate the feasibility of Grameen Bank in China.
Zhan Gao said, "People with clear visions are not our targets. Because at the bottom of society, people who have clear visions are more competent. But Grameen wants to help people with 'great pain in silence,' who don't dare go to the bank, would not like to loan, or even can't write. These people are Grameen's best customers."
Zhan Gao, the co-founder of Grameen China | Source: Web
Xiaoshan Du, the chairman of the China Microfinance Alliance, said that "it is not easy to do an excellent job of inclusive finance, and it needs to solve the problem of "sustainability" in a coordinated and systematic way from macro and micro levels. The Grameen Bank is a good example for us to follow."
Xiaoshan Du | Source: finance.sina
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