The primary goals of the 1990 Institute Microfinance Program are to reduce poverty in rural China and to develop sustainable microfinance institutions that provide capital, education, and training to the most impoverished people in the countryside.

Poverty remains a significant problem in China despite its tremendous growth. Hundreds of millions of people still live in rural areas and many are living on less than US $1 or $2/day. The 1990 Institute will assist in improving the livelihoods of many of these impoverished people by building sustainable Microfinance Institutions (MFIs) in China. These MFIs will provide micro loans ($150-700), education, and training to the poor so that they can establish micro businesses, expand their livelihood capabilities and be better able to care for their children and elderly. By assisting women in particular, three generations can be helped at the same time and the cycle of poverty can be broken.

MFIs in China have only achieved limited success to date due to shortfalls in several critical areas. These are:

• Adequate capital.  MFIs need access to adequate levels of capital in order to make loans to villagers.  The amount of capital at their disposal has to be high enough such that interest income is sufficient to cover operating and financing costs, as well as contingencies for bad debts and calamitous circumstances (e.g., drought);
• Education and training in business management.  The management and staff of MIs must be educated and trained in good institutional governance, business planning, and financial operations to optimize policies, processes, and procedures. Having access to international business best practices and adapting them to fit within the Chinese environment will greatly help MFIs become sustainable and strictly accountable;
• Access to other critical social services. MFIs also need to have access to providers of other critical services so that their borrowers can effectively run their micro businesses.  These service providers will supplement the activities of the MFI by providing basic health care, childhood education, nutrition, insurance, environmental protection, technical support (e.g., optimizing crop yields or avoiding plant and animal diseases), and technology;
• Local Oversight. MFIs must be closely monitored and supervised by an experienced Board of Directors to ensure efficiency, effectiveness, and accountability. Business planning must be constantly updated and operations must be strictly managed; and
• Strong relationships with local, regional, and central governments. MFIs must ultimately fit within the Chinese social organization and financial systems in order to be sustainable.  They must hold true to their mission of helping the poor and yet also generate sufficient revenues to cover costs, earn surpluses and gain access to traditional funding sources.  MFIs can only do this with the strong support of the government at all levels.

Our initial program is to provide capital and business know-how to an existing microfinance organization in Pucheng County, Shaanxi Province called the Pucheng County Women's Sustainable Development Association. Started by Plan International (China) (an international charitable organization) and the Pucheng County Women's Federation (an affiliate of the All China Women's Federation) in 2005, the Association is well-run and close to being self-sustaining with a 100 percent repayment rate. However, it requires additional capital and an increased staff to expand its scope of operations and gain access to capital from international and local financial institutions.

The 1990 Institute will provide capital and business management and training to the Association. The Shaanxi Provincial and Pucheng County Women's Federations and Plan China will provide improved education, health and technical training, access to clean water, environmental protection, and other social services to the borrowers. The Women’s Federation will also draw on its experience in working with central, regional, and local governments and with local social organizations. Together, the sponsors will provide on-site supervision of the Association's operations to ensure efficiency and effectiveness.

The combination of providing sufficient capital, experienced international business management, a wide range of social services, and hands-on local management with strong government support, is what differentiates our microfinance program from others. The 1990 Institute intends to use the Pucheng program as a sustainable microfinance model to develop other successful microfinance institutions in the future.