Berkley Center

One of the hardest parts about being abroad is missing out on some really great events on the Hilltop&mdahs;—most recently, I was excited to find out that Nobel laureate Muhammed Yunus would be on campus! He had been invited to screen his documentary, To Catch a Dollar: Muhammad Yunus Banks on America, and talk about the role of microfinance in eradicating poverty. Professor Yunus's work has taken on greater significance for me since I began volunteering with Wokai, an organization based on the success of Yunus's Grameen Bank model. Wokai, literally "I open" in Chinese, is a burgeoning microfinance NGO which helps underprivileged individuals in China, especially women, open their own businesses.

My involvement started a few weeks ago when I was introduced to some former Nanjing University study abroad students who are now living and working in Nanjing. As it happens, they were in the process of opening up a local chapter of Wokai. I was so intrigued that I decided to do some research.

Muhammed Yunus is the visionary who pioneered microfinance in the 1980s, for which he was eventually awarded the Nobel Peace Prize in 2006. His ambition was to make available as many small loans as possible to people who would otherwise have no access to capital, especially women, and then provide them with the support and training needed to grow a small business. The success of Professor Yunus’s initiative, which started in Bangladesh and India, has now spread all over the globe, having a particularly large impact in developing countries in Southeast Asia, South America, and Africa.

Microfinance is a very nascent business in China; until recently, the Chinese government was reluctant to allow microfinance institutions (MFIs) in the country, citing their higher interest rates as cause for complaint. The reason the interest rates are higher than regular bank loans is because of the high level of involvement that takes place with microfinance. Still, microfinancing remains cheaper than the alternatives (loan sharks), and more viable, since local banks usually refuse loan requests. In fact, as the preparations for the 2008 Olympics drew closer, accessibility to local banking branches became increasingly difficult as Chinese banks began closing down rural branches and moving towards cities. This created a growing problem which the government addressed in 2004 by lifting interest rate restrictions and allowing MFIs to offer their services.

In my Contemporary China class, we read and discussed the underlying issues of unemployment, especially in the countryside, and I was able to gain greater insight and understanding of the challenges and obstacles that China’s underprivileged class faces. At the same time, I was filled with hope as I realized the potential effect of microfinance on China’s agricultural class. The broad appeal of microfinance is that it is embraces the concept of “give a man a fish, feed him for a day; teach a man to fish, feed him for a lifetime.” This type of lending is not only socially viable but also commercially viable because it stimulates the economy by creating new jobs while changing the economic profile of a community. It provides a vehicle for the poor to turn their ideas into action, as well as achieve financial independence and long term sustainability. The success of microfinancing is tied to the long term relationship it forges with its borrowers; it is not simply lending people money, but also includes travelling to the most rural areas of China to access borrowers, teaching them how to start and run small businesses, and tracking their progress at regular intervals. Often, the individuals who receive the microloans already possess an intuitive business sense; they just need to be given the chance to show it.

This summer, while teaching English in rural China, I had the unique opportunity to live with a local family. My host father, whom I called Shushu (the respectful term meaning Uncle), is a superb cook. Although meat was a rare treat and eggs were too expensive, our often-vegetarian dinners were never wanted for color, flavor or spice. One day, I asked him why he didn't open up a restaurant in the nearby town. It was only a half hour away by motorcycle and he would have no problem getting customers. After a long sip of tea, he sighed. It was impossible to get capital. He had been trying for years to get a loan—just enough to cover the start-up costs, but without the initial capital, he had been unable to turn his dreams into reality.

In the spring of 2007, two college graduates started Wokai, in hopes of alleviating the immense poverty that affects so much of China’s rural population. The greatest part is, instead of relying on banks to provide the initial loan, Wokai invites contributors to make online donations of as little as $10. As each entrepreneur repays the loan, the contributor is invited to choose the next loan recipient from the website. The loan is recycled out and so each donation goes much further than the average proposal.

When I think about the potential and cumulative effect of this outreach initiative I am filled with hope for those individuals like Shushu who are just waiting for their chance to turn their ideas into reality. Microfinancing can and does complement and encourage the rapidly growing market economy in China. It is encouraging to see that women, who once faced greater societal obstacles for advancement, are now being directed towards a pathway to independence.