World Council Visits China to Explore Viability of Credit Unions

Pete Crear, CEO, World Council of Credit Unions, met with Madame Wu Xiaoling, Deputy Governor, People's Bank of China, who has taken a leadership role in the advancement of microfinance initiatives, as part of the government of China's objective to promote development in rural areas.

Madison, WI—World Council of Credit Unions' recent visit to China explored the potential for a credit union system in China. Currently China's financial sector is undergoing major changes, and World Council is working with regulators on a fast-track plan to analyze the impact that credit unions might have on consumer finance credit.

"Rural development is now a top priority of the Chinese government, which has also recognized the importance of consumer and production credit to all aspects of the country's development," said Pete Crear, CEO, World Council of Credit Unions who traveled with Ralph Swoboda, WOCCU's consultant on China. China has a history with credit unions. In the 1920s, American grant funding launched a credit union movement in China. Although credit unions disappeared during the chaos of World War II, China's rural credit cooperatives (RCCs) started in the late 1940s, influenced by the previous credit union movement.

Over a decade ago, most Chinese banks were owned solely by the government. In the current financial environment, many commercial banks—after adjusting to market conditions and the difficulty of making a profit in the rural areas—pulled out of the rural areas. Now there are virtually no financial institutions in many poverty-stricken areas. Because it is difficult for people to get loans from banks, private financing has developed, creating a huge unauthorized financing market which often charges extremely high interest rates. During the visit, World Council met with Madame Wu Xiaoling, Deputy Governor, People's Bank of China, the Chinese Central bank which is responsible for administering monetary policy, maintaining financial stability at the macroeconomic level, and regulates credit and fiscal services for the Chinese government. World Council also met with representatives from the China Banking Regulatory Commission, which assumed responsibility for the supervision of banks, RCCs and other depository institutions in 2003; Peking University; Rural Development Institute; Guangzhou City Rural Credit Cooperative Union; and the China Foundation for Poverty Alleviation.

"The consistent message we received from these organizations was that testing the credit union model in poor, rural areas would be one way to reform and restructure the RCC," said Crear. As a result, World Council has been invited back before the end of the year to visit some of the RCCs and share views on whether the credit union model would be a suitable one for the future.

World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.

World Council has implemented more than 290 technical assistance programs in 71 countries. Worldwide, 51,000 credit unions in 100 countries serve 196 million people. Learn more about World Council's impact around the world at www.woccu.org.