Antoaneta Bezlova
Celebrating the success of microfinance as an antidote to poverty has raised some uncomfortable questions here over China’s reluctance to allow civil society a bigger role in addressing tough social issues.
The achievements of the Grameen bank -- a Bangladeshi microcredit concept that has been replicated in more than 100 nations -- have been hailed the world over for its innovation and contribution to global poverty alleviation. The bank and its founder, economist Muhammad Yunus, have bagged this year’s Nobel Peace Prize for efforts “to create economic and social development from below.”
“The biggest difference between China’s version of Grameen bank and the Bangladeshi model is the degree of government participation,” Yunus told the media on his arrival in Beijing, a week after his Nobel award was announced. “In China, the model is dominated by the government, while in Bangladesh it is totally in the hands of non-governmental groups.”
These days there are about 300 institutions implementing microfinance projects around China, but most of them are small in scope and can reach only a limited number of peasants. The larger ones are operated by government-backed organisations such as the All-China Women’s Federation and the China Foundation for Poverty Alleviation.
While microfinance lenders are permitted to offer microcredit loans, none is allowed to collect deposits from people. The practice was described by Yunus as “cutting one leg off before it starts to run.”
‘’You are designing a sick institution which is always looking for somewhere to find the money to lend them to the poor people,’’ he said at the three-day Grameen International Conference on Microcredit in China that closed on Monday.
That China’s rural dwellers might be able to pull themselves out of abject poverty with minor loans, instead of relying on state handouts, should come as a great relief to the government. After all, despite its startlingly rapid economic growth China still has one of the largest groups of rural poor in the world.
There are now at least 200 million Chinese living below the United Nations definition of the poverty line, earning less than one US dollar per person daily, or 2,883 yuan a year. More than 40 percent of the country’s 1.3 billion people survive on less than two dollars a day.
Yet, being a manifestation of how civil society can create economic opportunities for the poorest, microfinance presents a tough challenge for Chinese officials who favour top-to-bottom large poverty alleviation schemes, implemented and controlled by the state.
Some Chinese academics argue that the microcredit model can do little to help people living in absolute poverty. Concepts such as Grameen could help only people living above the poverty line but struggling to earn a livelihood, they say.
‘’For people living in absolute poverty, they need to be covered by social security programmes,’’ Li Xiaoyun, director of the Humanity and Development Department at China Agricultural University, told a seminar on poverty alleviation in Beijing last week. “These (households) are usually families with old, sick and disabled members.”
Chinese official estimates of the poverty line is pointedly lower than the international standard. It is a subsistence level income of below 683 yuan (86 dollars) yearly, which allows existence in extremely reduced circumstances and without enough for basic food and clothing.
According to official statistics from last year, more than 2.3 million people live below China’s official poverty line. A further 4 million are said to be living just above the poverty line but struggling to meet their needs.
Over the years, China’s central government has favoured macro-schemes for poverty alleviation, disbursing cash grants and subsidies into the rural economy and investing in infrastructure.
Those efforts, however, have failed to address one of the main concepts of the Grameen model -- that poor should be regarded not as pitiable but as potentially responsible payers who can be empowered to make their own decisions.
Grameen operates by lending small amounts to poor individuals without collateral, yet getting repayment rates of 97 percent. The bank has lent 5.72 billion dollars since it began to people who used the money to start micro-enterprises. As of May this year, the bank had more than six million clients, the majority of them women.
Unorthodox as it was in China’s top-down bureaucracy, microcredit started to take root in the country in the 1990s and spread to numerous impoverished counties in the provinces of Hebei, Shaanxi, Sichuan, Guangxi and Yunnan. Credit workers set about establishing their programmes without government intervention and took a radical commercial approach.
China recognised the success of the microcredit model by endorsing it as a poverty alleviation tool in 1996. But, along with the government’s endorsement came newly imposed restrictions with coordination of poverty relief credits handed over to local authorities instead of credit workers from different non-governmental organisations (NGOs).
Allowing microcredit institutions to take deposits is seen by the government as mounting a challenge to the state banks and thus frowned upon, said one Chinese aid worker who did not want his name revealed. “The idea of creating a ‘bank for the beggars’ is still too bold for many in the Chinese leadership,” he told IPS.
Despite the scepticism about allowing civil groups to play a bigger social role, the Chinese government is motivated to act more aggressively on poverty alleviation by the widening gap between urban and rural areas.
The vast underprivileged population strikes a contrast to the country’s overall economic advancement with growth averaging 10 percent in the last 20 years. What Beijing sets out now as the official poverty line covers merely 20 percent of the rural population’s average annual income of 3,255 yuan (412 dollars).
This month the ruling Chinese communist party adopted a blueprint aiming to create a “harmonious society” by 2020 -- one in which wealth is to be distributed more evenly and the income gap narrowed. “What could be more conducive to creating a ‘harmonious society’ than giving a fair chance to the poor to prove themselves?” asked commentator Xin Lijian in the Beijing daily ‘Xinjing Bao’.
