Rebuilding a Robust Financial Cooperatives System in China: Learning from the Experience of Credit Union Movements in Hong Kong and Taiwan

Abstract

Recently, microfinance has become one of the most important mechanisms for providing financial services to low income households, and credit unions have been considered to be the major microfinance institutions in many developed as well as developing economies. Although financial cooperatives have a long history in China, the credit union movementin China is in its nascent stage. This study analyses the structure, regulation, performance, and competitive environment of credit unions in Hong Kong and Taiwan before and after the Asian financial crisis in the hope of formulating a credit union model which is suitable for China. The rest of this paper is organized as follows. First, it begins with an historical overview of informal finance in the Greater China Region. Second, it briefly discusses the evolution of China’s rural and urban credit cooperatives. Third, it presents some descriptive statistics to capture the development characteristics of the credit union system in Hong Kong and Taiwan. Forth, it identifies the difficulties faced by Hong Kong and Taiwan’s credit unions by analysing the trend movement of their savings and loans. Finally, the study concludes that the development of a credit union system from bottom-up will be conducive to the reduction of poverty in China.