Overview of Microfinance Markets and Investment Opportunities in Russia and China
Location
QED Group LLC1250 Eye St NW
11th Floor
Washington, DC 20005
United States
Metro
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Mikhail Mamuta
Russian Microfinance Center
Ning Tang
CreditEase
Click on the Event Resources button to view the presentation and other resources.
Based on data reported by Centurion Capital, overall demand for microfinance services in Russia currently amounts to 233 billion rubles (US$ 7.7 billion) and the current supply meets only about 15% of the demand. The average portfolio at risk in Russia is well below 4% and the operational self-sustainability is averaging at 127%. Nearly 50% of all MFIs have delinquency rates less than 2.7%. Microfinance sector is strongly supported by the Russian government and by the end of 2011 RMC is estimating that there will be about 700 registered MFOs and about 1200 credit cooperatives in Russia. Majority of Russian MFIs and credit unions are looking to expand their operations by partnering with international investors. Mikhail Mamuta will discuss how microfinance in Russia has been growing since 2003, he will talk about the market's structure and regulations, lessons learned from the 2008-2009 economic crisis, as well as risks and opportunities that microfinance investors and practitioners can encounter in Russia.
Ning Tang, Founder and CEO of CreditEase and Board member of the China Association of Microfinance, will continue this discussion by providing an overview of the unique microfinance market in China. According to the interview given by Mr. Tang to Business Wire, there are more than 50 million micro entrepreneurs in China and each year there are about 7 million new college graduates and about 200 million desperately poor Chinese in rural areas, who can benefit from microloans as well. Therefore, demand for microloans in China is also much greater than supply and microfinance sector is growing rapidly. Mr. Tang will talk about challenges and opportunities that investors and practitioners may face when operating in China.
Greenroom Interview: Key Takeaways
Ning Tang
Presenter Bio:
Since 1997 Mikhail Mamuta has worked in developing financial and lending technologies for small businesses and microfinance in Russia. From 1997 to 2000 he worked as a consultant for the Investments Committee of the Voronezh Regional Administration. Later he became the deputy head of the business development department, where he dealt with issues of financial and credit support and taxation of small businesses and developed a regional support program for small businesses. In 2000 Mamuta worked as general director of the Voronezh Regional Support Fund for Small Businesses, where he created and developed microfinance programs and built a regional microfinance network. Since 2001 Mamuta has served as an expert and trainer for several Russian and international microfinance programs. Mr. Mamuta was the director of the Russian Microfinance Center from 2002 till 2006. Mamuta has been the President of the Russian Microfinance Center since January 2007.
Mamuta is also a President of the National Partnership of Microfinance Market Stakeholders (NAMMS). He is a member of the Government Commission on SME Development and a member of the Coordination Council at the RF Ministry of Finance on the legislation development for the microfinance and credit cooperation. He actively participates in forming the ideology of building an all-inclusive financial system in Russia as well as the development of the draft laws concept aimed at the improvement of population and small business access to the financial services. He is a graduate of Voronezh State University.
Ning Tang has over 10 years of microfinance experience dating back to his college years during which he went to Bangladesh to study poverty alleviation through microcredit with Professor Yunus. Tang founded CreditEase, China’s first and now the biggest peer-to-peer microcredit platform, in 2006 and has built the company into a 5,000 person organization with a service network covering more than 30 cities all over the country. He is also an experienced venture investor and has in the past 10 years funded and advised on a number of start up companies many of which have grown into leaders in their respective sectors. He is a Board member of China Talent Group (China’s leading Human Resources Outsourcing service provider), DHgate (leader in next generation cross-border e-commerce), Tarena (China’s largest high-end IT training service provider) and Emay (China’s largest mobile enterprise solutions provider). In addition, Tang is a member of Tsinghua University China Entrepreneur Training Program’s advisory committee, advisor to Peking University Social Entrepreneurship Training Program, and he also heads China Association of Microfinance’s strategy committee.
This article provides more information about the microfinance climate in China, including statistics on MCCs in China as of Spring 2011.
Mr TANG,
At first, I want to thank CreditEase, for letting us think microfinance more as something in the reduction of poverty and social change, not simply the banking movement. But I also notice that many of the advocates from the microfinance sector in China have embrased more about the pursuit of profit, but not with identical degrees of ease and enthusiasm, my questions are:
1, what's your opinions on this point?
2, If there would be one stronger result in microfinance field, what would you want to see on the national level?
Thank you, and wish you a good trip in the US, any help, you can contact Chengcheng FENG, she is also the member of MINU.
In my view, both commercial success and social value are necessary.
We assume certain risk as first line of defense should default occur. We make our best efforts to protect borrowers and lenders.
Since Credit Ease matchmakes lender and borrower but assumes no risk for repayment for its fee, what is their view of the willingness of the PRC regulators to support expansion of this credit model in future?
We assume certain risk as first line of defense should default occur. We make our best efforts to protect borrowers and lenders.
Question from Rodolfo Quiros, LOCFUND (local currency MIV) in Russia
Prudential self-regulation. There is space there for the association of MFIs. Is something being done in this direction?
Financial supervision. Is the supervisory board actively trying to regulate large MFIs? In such a large country, is there fragmentation in regulation (limited to Moscow and a few large cities?
Regulation. Is there a ceiling on both interest rates and commissions?
1. Question from Liliana Bottega who is a Permanent Consultant for Women`s World Banking
I would like to know which would be a loan average required to serve microentrepreneurs who lack of financial services in the rural areas of China
I would like to ask Mr. Ning which would be a loan average required to serve microentrepreneurs who lack of financial services in the rural areas of China
2. Question from Rodolfo Quiros with LOCFUND, a MIV which lends in local currency
China: Institutional setting. What about the existence or weakness of certain institutions, such as a judicial system (independent and agile), a land/property registry (updated, reliable), credit bureau and a superintendence of financial intermediaries.
Supervisory technology. Is there a specialized microfinance unit at the regulatory board or at least a non-banking department? Do they apply a global risk assessment approach? The pressure on informal lending is it leading to make them regulated organizations or just formalizing some features of their operation?
Wholesale fund. What is its size? Privately owned and administrated? How many borrowing MFIs? Are fund owners/investors also clients?
3. Question from Bin Wang with the Microfinance Initiative of Nottingham University:
I think CreditEas have given us a good example, that let us think microfinance more in the reduction of poverty and social change, but not just the banking movement. But I also notice that most of the advocates in microfinance sector have embraced more about the pursuit of profit, not with the identical degrees of ease and enthusiasm, I want to ask Mr TANG, what is his opinion on this point?
4. Question from Jie from Nottingham University Ningbo China
I raise a question for Mr. Tang.Faced with the huge demand for microfinance, sources of microfinance are relatively insufficient. Selection of clients will be a significant issue. What are the criteria for clients when microfinance organisation choose who will be their clients?
To Liliana:
A few thousand RMB
To Rodolfo (responses from Ninga are bold):
1. China: Institutional setting. What about the existence or weakness of certain institutions, such as a judicial system (independent and agile)- Reasonably well
2. a land/property registry (updated, reliable)[Reasonably well, but there have been some recent loopholes at municipal level], credit bureau[non-existent] and a superintendence of financial intemediaries
3. Supervisory technology. Is there a specialized microfinance unit at the regulatory board[Not yet] or at least a non-banking department? Do they apply a global risk assessment approach? The pressure on informal lending is it leading to make them regulated organizations or just formalizing some features of their operation?[In my view, it will be a step by step approach, taking place at both local and central levels]
4. Wholesale fund. What is its size?[RMB5 million as initial capital] Privately owned and administrated?[Yes] How many borrowing MFIs?[Started 2 weeks ago. Will take MFI applications soon] Are fund owners/investors also clients?[No]
I would like to thank over 20 students who joined us via webinar from the Microfinance Initiative of Nottingham University in China. Thank you so much for your participation and will look forward to your engagement in our future activities on Microlinks!
Questions for Ning Tang:
Microfinance is aimed to reach the population that doesn’t have access to the regular financial service. It is expected to reduce social inequality and alleviate the poverty. But it is also thought compared with SMEs; people who Microcredit Company is serving could not make the most out of the money due to their capital, information and technology limitation. From a macroeconomic perspective, isn’t microfinance inefficient and unsustainable because it doesn’t allocate resource in a most effective way?
In my view, microcredit gives people badly needed resources to do better by investing in themselves and their businesses. Otherwise, people would not be able to utilize their idle time / resources well. Our experiences are that urban micro-entrepreneurs and the rural poor benefit from microcredit a great deal. We pay close attention to their well being after obtaining the credit loan
To learn about microfinance in Vietnam, you might be interested to view the following presentation created by the Vietnam Microfinance Working Group.
To learn more about microfinance sector in Asia in general, you can view resources posted by Banking with the Poor Network (BWTP). Members of the BWTP include Bangladesh, Cambodia, India, Indonesia, Laos, Nepal, Pakistan, Philippines, Sri Lanka, Thailand, Vietnam and Australia.
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