Microcredit For Poverty Alleviation: China's Practice of Solving the Loan Problem for Poor People

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Table of Contents
Foreword /1

ChapterⅠ Loans for the Poor--A Worldwide Problem
It is a worldwide problem that loans are hard-to-get, expensive and slow for poor population. Many countries have been trying to find the "key" to solve the problem. From the perspective of China's financial poverty alleviation practice, banks in the past more tended to design and provide financial products for non-poor groups, and there were few financial policies, products and services for poor rural households. The reason is that the poor rural households, financial institutions and government departments as the demand side, supply side and supervision service side respectively are facing various practical difficulties in docking the supply and the demand.
Ⅰ.1"Four Lows"of Poor Households /17
Ⅰ.2"Four Worries"of Financial Institutions /22
Ⅰ.3"Four Difficulties"of Government Departments /28

Chapter Ⅱ Innovation of Poverty Alleviation Microcredit Products In order to solve the problem of hard-to-get,expensive and slow loans for poor rural households, it is necessary for government departments to design scientific policies, make targeted preferential system arrangements, develop poverty alleviation microcredit products with low threshold, low cost and good service, and encourage and guide financial institutions to actively participate in poverty alleviation through policy measures,creating a virtuous circle for poor rural households to obtain the loans, make good use of the loans and repay the loans.
Ⅱ.1Policy Design /35
Ⅱ.2 Implementation /51
Ⅱ.3 Preliminary Achievement /64

Chapter Ⅲ Solve the Problem of "Obtaining the Loans"
To solve the problem of hard-to-get, expensive and slow loans for poor rural households, we should first solve the problem of "obtaining the loans" for poor rural households.The State Council Leading Group Office of Poverty Alleviation and Development and other departments, by adhering to the problem orientation, started from the removal of loan threshold and loan restrictions, introduced innovative policies, scientifically designed products, and strived to solve the problem of loan accessibility for poor rural households. In the process of promoting the implementation of policies, local governments innovate credit rating methods, scientifically determine the specific amount of loans for poor rural households, and build a three-tier county-township-village financial service system, so as to create conditions for poor rural households to obtain loans and facilitate their usage.
Ⅲ. 1 Removing Threshold by Government Credit Enhancement / 73
Ⅲ. 2 Setting the LoanLimitby CreditRating /84
Ⅲ. 3 Improving Service by Departments Collaboration /96

Chapter Ⅳ Solve the Problem of "Making Good Use"
The fundamental purpose of innovation and development of poverty alleviation microcredit is to use credit funds effectively so as to help the poor rural households increase their income and get rid of poverty. After removing the threshold and restrictions of the loans for poor rural households and enabling them to obtain loans, only when we solve the problems of "where to use""how to use" and "how to produce the profit", can we ensure that the limited credit funds are used in the production development where they need most, which helps them increase their income and get rid of poverty, so as to achieve the expected effect of the policy.

Ⅳ. 1 Defining the Purpose of the Loan /111
Ⅳ. 2 Standardizing the Usage of the Loan /118
Ⅳ. 3 Improving the Use Efficiency of the Loan /128

Chapter Ⅴ Solve the Problem of"Repaying"
The poverty alleviation microcredit is a bank loan, whose principal and interest should be repaid on time according to the loan contract, instead of the poverty alleviation fund which can be used free of charge. Only if the loan can be "repaid", can the bank lend without worries, the people be at ease, and the government be relieved. Only in this way can the policy betruly stable and sustainable. In order to make the poor rural households able to repay the loan, we must make efforts in the dynamic monitoring of loans, prevention and early warning and classified handling.
Ⅴ. 1 Based on Regulation and Monitoring /139
Ⅴ. 2 Sticking to "Prevention First" /153
Ⅴ. 3 Valuing Classified Handling /162

Chapter Ⅵ Typical Cases
After the introduction of the poverty alleviation microcredit policy, many typical examples have emerged. For example, at the provincial level, Anhui Province innovates the "one-self and three-cooperation " approach. At the county level, Yanchi County of Ningxia Hui Autonomous Region has taken a way of "relying on financial innovation to promote industrial development and relying on industrial development to boost the poor rural households' income". At the village level, Baogou Village, Yunyang District, Shiyan City, Hubei Province has broken the ice of rural finance, innovated the "new six views" credit rating and granting method, and promoted the rapid development of poverty alleviation microcredit.
Ⅵ. 1 Poverty Alleviation Microcredit Case of Anhui Province / 169
Ⅵ. 2 Poverty Alleviation Microcredit Case of Yanchi County / 193
Ⅵ. 3 Poverty Alleviation Microcredit Case of Baogou Village /218

Chapter Ⅶ Innovation of Financial Poverty Alleviation System with Chinese Characteristics
The function of financial policy instruments is a significant feature of the battle against poverty. Based on China' s reality conditions, poverty alleviation microcredit aims at the special group of poor rural households. Starting from the structural reform of the financial supply side, it not only strengthens the top-level design, but also encourages innovation at the grassroots level. It blazes a trail of financial poverty alleviation with Chinese characteristics, leaving a strong mark for the innovation of China' s financial poverty alleviation system, and its value and influence are everlasting.
Ⅶ. 1 Innovation of Financial Poverty Alleviation System /251
Ⅶ. 2 Innovation Highlighting Advantages of Chinese Characteristics /272
Ⅶ. 3 Consolidating and Deepening the Achievements ofInstitutionalInnovation /285

Appendix Operational Guidelines for Poverty Alleviation Microcredit /293

Postscript /307
Afterword /313
Microcredit For Poverty Alleviation: China's Practice of Solving the Loan Problem for Poor People