Contrasting China's Yunan Model with Bangladesh's Yunus Model for Microfinance
(9 pages of text)
In 2008, about the time when the Yunus Model of microfinancing was under attack in its home country of Bangladesh, the Yunan Model was begun in rural China. The original model suffered from inefficiencies, high interest rates and allegations of improprieties against the founder, Nobel Prize winner Muhammad Yunus. By contrast, the Yunan Model relied on social capital and mechanism design theory to enlist the rural population, financial institutions and government in a cooperative effort to increase the financial stability and entrepreneurship level of one of the poorest areas of the country. Could “microfinance with Chinese characteristics” offer a plan to reduce poverty across China?
- To introduce students to the concept of microfinance and to show through a comparison of the Yunus and Yunan models that models should always be subject to change and improvement.
To show how social capital and mechanism design theories affect the development and operation of a microfinancing model.
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