Chapter 3: A Resource-based View on Microfinance in China: Case Study of Rural Credit Cooperatives

In China, the government has embraced a trickle-down strategy to facilitate the financial inclusion of the agricultural community, aligning with the UN Sustainable Development Goals and demonstrating a steadfast commitment to fostering inclusive development. This approach stands out as a pioneering endeavour, particularly in contrast to the prevailing paradigm in many democratic nations elsewhere, where the 1990s witnessed a shift from donor and subsidy-based microfinance to sustainable finance amid the pursuit of liberalization goals. However, the rural credit cooperatives (RCCs) in China encountered a myriad of challenges, including non-performing loans, governance deficiencies, and inadequate risk management. In response, substantial reform initiatives were implemented to integrate and align these RCCs with the formal financial system in China. Despite these hurdles, the RCCs have fundamentally influenced the development of the rural sector in China, playing a pivotal role in its financial evolution. This chapter aims to furnish a comprehensive analysis of the RCCs and their profound impact on the financial development of the rural economy in China. By delving into the intricacies of the challenges faced, the collaborative efforts undertaken, and the ultimate contributions of the RCCs, this study endeavours to offer a nuanced understanding of their role in shaping the financial landscape of China’s rural economy.