> Posted by Kaj Malden, Project Manager, PlaNet Finance China

Huimin Microcredit client engaging in budgeting exercise

Poor rural women in China face challenges not dissimilar to poor rural women in other developing countries. Many are homemakers and child rearers, with much of their work tied to the home, offering little social or professional mobility. However, there are some dynamics in China that make women’s conditions somewhat different. The Communist Revolution of 1949 promulgated an ideology that favored gender equality and claimed women “hold up half the sky” (半边天). According to a recent study by the World Economic Forum, gender inequality is more apparent in the developed economies of Japan and Italy than in China. Modern China’s One-Child Policy, however, leads to a cultural view that “values males and belittles females” (重男轻女). The fact that China’s gender ratio skews towards males may support this view and suggest that parents favor males. Additionally, China’s massive urbanization continues to create large flows of migrant workers, posing other challenges for women. Husbands often find work in neighboring provinces or eastern coastal cities, leaving their wives to manage the household’s finances and run the family business independently.

The management of household finances offers an interesting vantage point for considering not only gender equality in China, but also the opportunity to empower women through financial training. This forms the logic behind a financial education project PlaNet Finance China (PFC) is currently implementing. Supported by Diageo’s Plan W program (which supports non-profit projects that advance women’s empowerment), the project provides rural women in China with financial education to promote their ownership over household economic decision-making, thereby delivering empowerment. PlaNet Finance China works with Huimin Microcredit Company, a vanguard of rural microfinance in China, to embed light touch financial education for women throughout their lending practices. Instead of classroom-style seminars, PFC and Diageo designed a series of innovative tools for use at the MFI and at home including interactive budgeting e-calendars and “choose your own [financial] adventure” style readers. Huimin is an ideal distribution channel, given its 90 percent female client base. Most rural MFIs share this characteristic, whereas urban MFIs are more gender neutral.

When we spoke with one woman who makes economic decisions in the household, she said: “My husband, he oversees all of it, he makes the decisions. But I have to calculate and manage those decisions myself. ”

This woman is a mother of three, with her own plot of land whose corn crops she single-handedly manages in order to afford schooling for her children, house repairs, and food. She has decided to borrow money from a local microfinance institution, with a signed contract in her name. A conversation between her and her loan officer reveals why the microfinance institution lends directly to her:

Client: “Why is it always women that sign these forms and not the men?”

Loan Officer: “Because women are tied to the land. Their husbands make the majority of income necessary to support the family, but they must leave the village to find work, and pose more of a risk for us when it comes to collecting interest payments or avoiding a loan-default scenario. Their wives must stay to raise the children, manage the household, and work in the fields. They are less of a risk for us.”

Loan officer reviewing financial exercises with clients

Financial Inclusion through Financial Education

What’s illuminating here is the fact that, due to women being unable to move, this MFI seems to “trust” them with microloans more than men. This may suggest that with the right skills and training, women that sign microloan contracts could not just be doing more for their families, but could also be bigger contributors to the country’s economy, which is soon set to be the world’s largest. Yet, even with such a vital global economy, the Chinese population is not very financially literate. In a 2012 study by Visa, China ranked 14th out of 27 countries in financial literacy, behind countries like Belarus and Bosnia. In the same study, China ranked 18th out of 27 in household budgeting practices. With the right financial training, women in China, especially in rural areas, could emerge with an important role in building financial inclusion.

But what is the right financial training? Women in rural China, similar to the rural poor in other regions of the world, already seem to be adept at managing finances. As Portfolios of the Poor shows us, many impoverished people lead complex financial lives and make use of both formal and informal tools. However, for rural women in China, their financial understanding could be more standardized and context-relevant. In Ningxia province, for example, where farm land is recovering from desertification, income from agriculture can be unreliable as can the wages from migrant labor that men pursue. Both amount and frequency of remittances from husbands can be in flux. Such irregularities in money flows make particular lessons in formal financial education, such as investment diversification, more critical. Compared to other markets, interestingly, lessons in savings are not as helpful to China’s rural clients. Chinese culture already champions savings habits. And lessons in mobile banking, while intriguing and innovative, don’t have the same immediacy given a lack of sophisticated telecommunications infrastructure in China’s rural areas.

The experiences of the rural Huimin microfinance institution in China, as well as distinct gaps in financial knowledge, show us that there is a big opportunity in advancing financial inclusion in the country starting with financial training for women who are the principal recipients of microloans and ultimately the ones who manage many household budgets. If women continue to be rurally isolated, knowledge and service deprived, and “tied to the land,” then financial inclusion can start with them.

Have you read?

Ratings to Loosen the Regulatory Noose on China’s Microcredit Companies

Designing Financial Services for China’s Marginalized

China’s Microfinance Landscape: Nonprofits, Microcredit Companies, Rural Financers, and Alibaba