MFI Report

Chifeng, located in the north semiarid area, belongs to the nation-level poor area supported stressively by the Chinese government for the poverty alleviation task. The UNDP’s microfinance (mf) programs in Chifeng covers six townships in four counties, three of which are the nation-level poor counties set by the country. The UNDP’s mf programs started in 1998. At that time, the mf program was first introduced to Chifeng as a part of the “Poverty Alleviation and Women in Development in Inner Mongolia” program implemented by Chifeng Women’s Federation (CWF). The Project included three components: (1) Poverty alleviation by micro-credit (core component of the Project, (2) Demonstration of sustainable household ecological agricultural production system and (3) Training of gender awareness. The close cooperation between UNDP (Funding Agent), CICETE (Executing Agent), and CWF (Implementing Agent) has ensured the success of this project. The period of the project is three years. In year 2001, Chifeng project was selected from the first phase projects of UNDP to be one of the demonstration projects under the Sustainable Microfinance to Alleviation Poverty Project (SMAP), in which four institutions out of 48 were selected as the pilots. Since then, Chifeng project has turned to be a single mf project rather than a comprehensive poverty alleviation project with mf component in it. The main fund resource of Chifeng MFI is from UNDP. SMAP has helped Chifeng MFI in the following aspects: •Help the MFIs build up accounting capacity and upgrade financial systems in line with international standards. •Help the MFIs design five year business plans. •Help the MFIs upgrade and expand product methodology of existing products and design new products to meet the market needs. •Improve and apply MIS computerized system in the MFI. •Improve the overall management of the MFI by restructuring the organization and improving specialization of the staff. The objective of all above efforts is to help CZWSDA to become a real independent MFI. The challeges that the MFI is facing now are shown as follows: 1. The legal environment in China is not conducive enough for microfinance to develop quickly and freely. 2. Current management handles the work skillfully with very good performance, but as the MFI is developing, we understand that the management may need more professional skills and knowledge on financial and portfolio risk management. Being short of money is also difficult for the MFI to perfect its human resource management system, including staff training, and attracting and retaining the high-level qualified staff. 3. Even though the Chifeng mf project has turned out to be one of the best practices in China, it is still a new institution groping its way for development. The market potential is big, whereas the scale of the MFI’s business is still small, which is not in favor of expansion with either loan portfolio or the number of clients. The current legal status doesn’t give the MFI chances to absorb financial resources by getting public savings, thus it has to get money from other sources. However, fundraising is a big challenge that the MFI has been facing since its very beginning. 4. The structure of the MFI needs to be further more improved to meet the need of reaching the goal of sustainable development. 5. On the process to be expanding, the MFI may need more computers and space for working room etc.(the MFI’s physical need), whereas its financial status doesn’t allow it to buy a building or update and renew equipments such as computers regularly. Hide