Microcredit in the New Era and Relative Poverty Governance: Theoretical Logic and Case Evidence

Internationally, microcredit for poverty alleviation faces the problems of rent-seeking, financial unsustainability, and corruption on the part of financial institutions and high interest rates, over-indebtedness on the part of borrowers. China innovatively designed poverty-alleviation microcredit in 2014, which has played an important role in supporting the production of poor people and should continue to be adhered to. After entering the new era of building a moderately prosperous society in all aspects, poverty alleviation microcredit has been transformed into microcredit for people who have escaped poverty, facing the target change from solving absolute poverty to alleviating relative poverty and promoting common prosperity. The article theoretically analyzes the impact of the microcredit management system reform and the service mode innovation on relative poverty alleviation in the new era and then conducts a case study using the data in Yanchi County, Ningxia. Theoretically, microcredit in the new era, on the one hand, solves the dilemma through reforming management system, mainly through transforming the supported target, regulating the use of loans to solve the problem of excessive demand and lack of financial literacy, and through reforming the interest rate, relaxing the loan restrictions to solve the difficulty of financial unsustainability. On the other hand, through the digital transformation of the service mode, it also mitigates the problem of financial unsustainability, improving service quality, strengthening credit supply, and optimizing risk management. Thus, the new era microcredit can successfully alleviate the relative poverty in terms of income inequality, opportunity inequality, ability inequality, and subjective relatively deprivation. In practice, based on the implementation of new era microcredit, Yanchi County has promoted the relative poverty groups to get credit, use it well and repay microcredit through various innovative measures, such as establishing a whole-village credit database, implementing grid-based management, and conducting dynamical monitoring, thereby significantly alleviating relative poverty. Therefore, for microcredit to continue to play a significant role in supporting the development of relatively poor groups, it should be continued and optimized in the new era with management system reforms as well as the use of digital technologies to optimize services.