ABSTRACT
This chapter examines why small and micro-enterprises in rural China are underfinanced. It looks at how financial reforms and macroeconomic constraints have affected the operation and performance of the rural credit cooperatives, and therefore their ability to lend to farm households. Various donor-supported micro-finance programs have been introduced in poor rural areas to help farm households gain access to credit. These programs have been innovative in introducing repayments in instalments, group guarantees and interest rates that are high enough to cover operational costs. Technical support and capacity building are other important elements behind the success of these programs. China’s micro-finance experiments may therefore offer some important lessons for the future financing of small and micro-enterprises in both rural and urban China.
