The winner of the 2006 Nobel Peace Prize, Muhammad Yunus, has called on China to establish a regulatory body for micro-finance projects. China has started experimenting with micro-credit, but, the current rules are limiting the success of a system that has helped millions of people worldwide out of poverty.
Speaking at the International Micro-credit Conference in Beijing Sunday, Muhammad Yunus highlighted the benefits of self-sufficient microfinancing, a concept he developed to help Bangladesh's poor and for which he received this year's Nobel Peace Prize.
Yunus founded the Grameen Bank 30 years ago to provide small loans to help the very poor start income-generating activities.
On Sunday he emphasized that if micro-credit programs are to grow and be sustainable, governments need to establish a specific regulatory authority for microfinancing.
"In the absence of it people are not sure what you are suppose to do, anyone can stop you from doing things, because there [is] no law giving you authority," said Yunus. "Creation of that will clear the environment so we know the rules for the game."
The Nobel laureate also pointed out that the Grameen Bank is successful because it generates profit. He said micro-credit institutions need to be self-sufficient to avoid relying on donors to provide the money for the poor.
China currently has seven micro-finance projects running in five provinces, but regulations do not allow loan recipients to redeposit profit generated with the original lender. As a result, the system is not self-supporting.
Yunus said Sunday that China needs to change to a self-sufficient system if it wants micro-credit programs to succeed.
The Grameen Bank says micro-finance has helped 100 million poor people worldwide since 1997, but fewer than 100,000 of those are in China. The bank also says micro-financing could reach another 75 million families by 2015, a figure that would be easy to reach if China develops successful micro-credit programs.