Danone Charging Forth With Microcredit in China

Knowledge@Wharton recently published an article, Microfinance in China: A Growing Footprint in the Wake of New Guidelines. The seed for the article is obviously the March 11 announcement of plans by the China State Council's Poverty Support Office, Danone Group, and Grameen Bank.

The microfinance numbers in China are astounding. Here are some key stats from the article on the size of microfinance in China:

• The National Development Bank (NDB) "has issued 4.6 billion yuan (US$676 million) in microloans during the past three years."
• Rural Credit Cooperatives "began microfinance operations ten years ago and had total loans of 3.2 trillion yuan (US$471 billion) by the end of 2007."

Big numbers. But the article does point out that nature of microfinance in China is a little different than the $10-18 loans that Grameen issues in Bangladesh. The average value of microloans issued by the NDB is 76,000 yuan ($11,000), and the article gives the impression that unsecured loans ranging from 1,000 yuan ($147) to 100,000 yuan ($15,000) fall in the microfinance category.

This morning I was flipping through the final section of the March 19th Economist and noticed a headline suggesting that even microfinance was displaying vulnerability in the credit crisis, Sub-par but not subprime. I had to read the article to discover whether Danone was stepping into another mangrove. The answer appears to be no, at least as far as funding is concerned. A lot of microfinance institutions (MFIs, apparently) are funded by aid organizations. Aid organization budgets are being cut, and MFIs are getting the short end of that stick.

So, Danone looks somewhat safe here. And if the deal does blowup... Well... I really miss saying Wahaha aloud, and if we start talking about Danone again, maybe, just maybe, I can go back to saying "Wahaha," loudly.