The massive micro-credit demand from rural households, small and medium enterprises (SMEs), micro-enterprises and unemployed urban residents has hardly been satisfied, creating a large potential market for inclusive financial services in China, a rural financial expert said Wednesday.

From the perspective of the origin of financial services demands, the types of financial demands include credit, savings, insurance, and investments, among which, the demand for credit is the most difficult to satisfy, Professor He Guangwen from the University of Agriculture pointed out.

He said in a world micro-finance workshop held yesterday that rural households have significant demands for funds. According to a survey made in rural areas in Guizhou and Sichuan provinces, although a large number of farmers are now working in cities as migrant workers and most of the people left in rural areas are women, children and the aged, rural people in China still need loans to cover the traveling and living expenses associated with working in cities, education fees for children, money for home construction, funds for developing large-scale cultivation and start up monies to create new businesses in nearby towns.

Based on the statistics from the People's Bank of China (PBOC), in September 2007, out of China's 230 million rural households, more than 77 million were loan clients, covering 33 percent of the total number of rural households.

Figures from the State Statistics Bureau in 2006 also show that the registered unemployed population reached 8,470,000 by the end of 2006, accounting for 4.1 percent of the total urban population. Urban commercial banks in many cities, such as the Bank of Beijing, and the Tianjin Commercial Bank, have initiated micro guarantee loans for laid-off workers. Financial departments of local government have also set up micro-credit guarantee funds for laid-off workers, ensuring that micro-credit can be provided to unemployed people.

The number of SMEs, especially small enterprises, and micro-enterprises, is increasing rapidly. By the end of June 2007, there were more than 42,000,000 SMEs, accounting for 99.8 percent of the total number of enterprises in China. The numbers of SMEs and sole proprietors registered under the Administration of Industry and Commerce (AIC) amounted to 4,600,000 and 38,000,000 respectively, according to the statistics from the SME Department of the National Development and Reform Commission (NDRC).

However, the current financial services cannot satisfy the needs for them, Professor He stressed. Fifteen percent of the less-developed areas in China do not have any financial organizations. Even if financial organizations do exist in parts of the country, they are still lacking in micro-credit services, funds for loan and financial services staff, with overall service ability comparatively low.

In addition, the loan/deposit ratio of Rural Credit Cooperatives (RCCs) in rural areas is very high, Professor He added, which means that a serious shortage of funds exists and capital is overextended. The market share of micro-credit and other financial services provided by RCCs is still relatively small while the remaining potential market is massive.

This micro-finance workshop was organized by the World Micro-finance Forum Geneva (WMFG), in collaboration with the United Nations Development Program (UNDP) and the China International Center for Economic and Technical Exchanges (CICETE). Chinese and international experts expressed their opinions, focusing on how to build inclusive financial services in China; in particular, on the remaining challenges and opportunities related to scaling up access to finance, which covers demand and supply-side issues as well as the enabling environment.

(China Development Gateway by Xu Lin February 28, 2008)