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And Now from East Asia—The Good News March 14, 2011 Eric Duflos EmailPrintinShare The first good news has come from China, where Chinese Premier Wen Jiabao recently mentioned that “China will eradicate poverty by 2020” at a recent gathering of the National People’s Congress. The State Council is developing a ten-year poverty-reduction plan and it is expected that policy makers will put significant emphasis on raising the income of the 150 million people who live below 1 dollar. One can hope that microfinance will contribute to achieving these goals. Microfinance in China has indeed witnessed a rapid evolution in the last 4 years, with the emergence of privately owned Microcredit Companies (MCCs), in which several cross-border investors have put equity (e.g. ACCION, Microcred, IFC). From 8 MCCs in 2008, there are now more than 2,500 of them. The recent creation of the China Postal Savings Bank could also greatly contribute to expanding financial access in rural areas. By the end of 2009 it had 3,700 outlets (70% in rural areas) 360 million depositors and over 1.7 million micro-borrowers just three years after the start of its micro-credit program. East Asia is witnessing a relatively stable growth when it comes to microfinance. According toMixMarket data, growth in the number of borrowers in East Asia averaged 20% per annum between 2007 and 2009 and the number of micro-depositors grew by 15% in 2009. Financial performance is stable with ROA just below 2%. More importantly, considering the current repayment crisis we see in a few markets in other parts of the world, the Portfolio at Risk at 30 days has been kept below 2.5% in East Asia – less than half the global figures – even though some countries such as Cambodia need to be watched closely. Microfinance in East Asia has also shown resilience to the global financial crisis. This resilience can partly be explained by the fact that most East Asian microfinance institutions fund themselves significantly through deposits, unlike South Asian MFIs for which borrowings is the primary funding source. In addition, East Asia was probably better prepared for such a crisis since it has had its own major financial crisis within the last decade. Cross-border investment in microfinance has also continued to grow in East Asia, with 19% more commitments in 2009 than in 2008. The 2010 CGAP funder survey shows that microfinance gets support from 27 public donors and investors, 12 foundations & NGOs and 42 microfinance investment intermediaries (funds) in the region. They spend more money on capacity building than in other regions (16% of total commitments) and most of them are stepping up their focus on responsible finance, by adopting the Client Protection Principles, and some cases requiring social performance assessments for their investees. So while no region is ever fully protected against risk, the trends in East Asian microfinance for steady growth look promising.   http://www.cgap.org/blog/and-now-east-asia%E2%80%94-good-news