The Influence of Formal and Informal Institutions on Microcredit: Financial Inclusion for Micro-Entrepreneurs by Lender Type
- 578 Downloads
This chapter applies the Helmke–Levitsky typology of informal institutions to discuss how the interaction between the formal and informal institutional environment has shaped the development of China’s microfinance industry. The chapter shows that formal regulatory framework influenced commercial ‘for-profit’ microfinance providers (village and township banks or ‘VTBs’) and public interest microfinance providers (microcredit companies or ‘MCCs’) in different ways. While MCCs suffer deficiencies of not being able to accept savings deposits, VTBs are restricted by the inability to charge higher risk-adjusted interest rates. Geographical separation and low levels of out-group trust constrain the development of microfinance organisations, especially when the organisations do not have strong ties to local communities This study was approved by the appropriate university ethics committee and subsequently performed in accordance with the ethical standards in the 1964 Declaration of Helsinki. All persons gave their informed consent prior to inclusion in the study. Details disclosing the identity of the subjects under study have been omitted. The authors have full control of the primary data and have no financial relationship or conflict of interest with the organisations involved in the research.
KeywordsFinancial inclusion Helmke–Levitsky framework Institutional theory Microenterprise Microfinance Poverty alleviation
China Banking Regulatory Commission
People’s Bank of China
Village and Township Bank
- Argandoña, A. (2010). Microfinance. In J. R. Boatright (Ed.), Finance ethics: Critical issues in theory and practice (pp. 419–434). Hoboken: Wiley.Google Scholar
- Brislin, R. (1993). Understanding culture’s influence on behavior. Fort Worth: Harcourt Brace College Publishers.Google Scholar
- Britta, A., & Fouillet, C. (2010). Profit empowerment: The microfinance institution’s mission drift. Perspectives on Global Development and Technology, 9(3–4), 327–355.Google Scholar
- Bryman, A. (2008). Social research methods. Oxford: Oxford University Press.Google Scholar
- Cerny, S., & Tou, J. (2010). Microfinance: The untapped Chinese market. China Briefing: Magazine and Daily News Service. Retrieved from http://www.china-briefing.com/news/2010/05/13/the-untapped-chinese-market.html.
- Child, J. (1994). Management in China during the age of reform. Cambridge: Cambridge University Press.Google Scholar
- Cowton, C. (2010). Banking. In J. R. Boatright (Ed.), Finance ethics: Critical issues in theory and practice (pp. 325–337). Hoboken: Wiley.Google Scholar
- DiMaggio, P. J., & Powell, W. W. (1991). Introduction. In W. W. Powell & P. J. DiMaggio (Eds.), The new institutionalism in organizational analysis (pp. 1–38). Chicago: University of Chicago Press.Google Scholar
- Eisenhardt, K. M. (1989). Building theories from case study research. Academy of Management Review, 14(4), 532–550.Google Scholar
- Glaser, B. G., & Strauss, A. L. (1967). The discovery of grounded theory: Strategies for qualitative research. New York: Aldine de Gruyter.Google Scholar
- He, G., Du, X., Bai, C., & Li, Z. (2009). China microfinance industry assessment report. China Association of Microfinance. Retrieved from http://en.chinamfi.net/portal/PortalHome.asp.
- Hulme, D., & Mosley, P. (1996). Finance against poverty. London: Routledge.Google Scholar
- Lee, T. W. (1999). Using qualitative methods in organizational research. Thousand Oaks: Sage.Google Scholar
- Miles, M., & Huberman, A. (1994). Qualitative data analysis: An expanded sourcebook. London: Sage.Google Scholar
- Peng, M. W. (2000). Business strategies in transition economies. Thousand Oaks: Sage Publications.Google Scholar
- Peng, M. W. (2003). Institutional transitions and strategic choices. Academy of Management Review, 28(2), 275–296.Google Scholar
- Peng, M. W., & Heath, P. (1996). The growth of the firm in planned economies in transition: Institutions, organizations, and strategic choice. Academy of Management Review, 21(2), 492–528.Google Scholar
- Roodman, D. (2012). Due diligence: An impertinent inquiry into microfinance. Washington, DC: Center for Global Development.Google Scholar
- Scott, R. W. (1995). Institutions and organizations. Thousand Oaks: Sage.Google Scholar
- Sparreboom, P., & Duflos, E. (2012). Financial inclusion in the People’s Republic of China: An analysis of existing research and public data. A Joint Publication of CGAP and the Working Group on Inclusive Finance in China: China Papers on Inclusiveness No. 7. Retrieved from http://www.microfinanceforum.org/wp-content/uploads/2012/09/WMFG-China-Overview_v7-electronic_hr.pdf.
- Tsai, K. S. (2002). Back-alley banking: Private entrepreneurs in China. New York: Cornell University Press.Google Scholar
- Woller, G., Dunford, C., & Woodworth, W. (1999). Where to microfinance? International Journal of Economic Development, 1(1), 29–64.Google Scholar
- Wu, E., & Yuan, X. (2013). Emerging risks on China’s path towards financial inclusion—A joint publication of PlaNet Finance and CreditSuisse. Retrieved from http://www.microfinancegateway.org/p/site/m/template.rc/1.9.61842/.