BEIJING, Aug. 18-- How can poor people shake off their shackles and start a business?

Commercial banks are unlikely to help as borrowers cannot provide any collateral or guarantee nor are they considered credit worthy.

The answer lies with microfinance. It provides hope to many poor entrepreneurs as it has done in the past two decades in China, helping millions start their own small businesses.

Microfinance organizations offer loans at low interest rates and allow borrowers to pay back in small instalments.

There are currently three kinds of microfinance organizations providing such help.

The earliest and most active are the 300-plus private and semi-private institutions, some in co-operation with experienced international organizations.

Combined, they have lent more than 1 billion yuan(US$123 million), according to Du Xiaoshan, a pioneer of microfinance research and practice in China, and also vice-director of the Rural Development Institute under the Chinese Academy of Social Sciences.

"They usually offer loans below 3,000 yuan(US$370) to each family," Du said.

Other microfinance institutions, including the All-China Women's Federation, the State Council's Poverty Alleviation Office, the Agricultural Bank of China and rural credit co-operatives, get heavy financial support from the Chinese Government. They have played a big role and lent a combined 222 billion yuan(US$27 billion), Du added.

Du made the remarks at the recent launch ceremony of the first-ever Global Microentrepreneurship Awards(GMA) in China, which aims to raise awareness of microfinance and promote micro-entrepreneurship.

Although many private and semi-private institutions are enthusiastic about microfinance programmes in China, they face financial problems.

"They can only provide loans but cannot take deposits," Du said."Their capital is mainly self-raised, donated or entrusted by other organizations."

How these institutions survive and thrive has become a key issue in China's microfinance development, Du pointed out.

The central bank and the China Banking Regulatory Commission are working on a policy to give microfinance providers a clear and proper legal environment to boost the development of microfinance in China.

The policy is likely to be announced by the end of this year, according to Renaud Meyer, deputy resident representative of United Nations Development Programme(UNDP) in China.

UNDP, which has helped about 300,000 people in China in 10 years, is also helping the government to formulate the best policy.

"It is very important for China to have its own policy and microfinance mode," said Meyer.

The UNDP and Citigroup are the major facilitators of the GMA in China.

Citigroup, a world-leading financial services company that has been in China since 1902, donated US$1.3 million in 2001 to support microfinance development in the country.

Last year, it donated another US$1.5 million to establish a microfinance training centre and promotion network in China.

Asked the relationship between its donation and it own business development in China, Richard D. Stanley, chief executive officer of Citigroup in China, said:"Everything is linked, we want to make a positive contribution to the community and do the right thing in the long term."

(Source: China Daily)