Boundaries of Microfinance: A Case Study of Microfinance Business of CD Finance

Yu Luo ()
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Yu Luo: Renmin University of China

Chapter Chapter 2 in Inclusive Finance in China, 2021, pp 27-74 from Springer

Abstract: Abstract We will discuss the boundaries of microfinance with the micro loans issued by CD Finance Management Co., Ltd. (hereinafter referred to as CD Finance) in rural areas as an example. Microfinance is fundamentally different from traditional finance in terms of customer positioning, loan limits, credit products, risk control methods, etc., which constitute the upper boundary of microfinance. Microfinance shall determine the loan interest rate that enables its financial self-sufficiency and complies with the social mission and goal, which is the lower boundary that distinguishes it from charity. Adopting the Rosenberg model and the cost-plus pricing method for calculation, we found that the interest rate that should be charged by CD Finance for maintaining a low profit rate (1%) is almost equal to its actual loan interest rate, indicating that CD Finance is basically in the state of financial self-sufficiency.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-16-1788-1_2

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DOI: 10.1007/978-981-16-1788-1_2

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