Knowledge at Wharton says:

The Agricultural Bank of China's showcase microfinance project -- its only such project -- is based in a small but tidy office in a dry mountain region in the country's far west. Founded in the early 1990s with Australian development money, the program -- which doles out small loans of less than $250 each -- is directed at three of the poorest counties in China. It has been a boon to local farmers who have used the money to buy chickens and seeds, and  even open small stores that sell everyday items.

But is it profitable? Not really, acknowledges Liang Fuxian, the director of the program, which is based in Qinghai Province. He says that in recent years, the interest has barely covered expenses. "Costs are high," he notes, adding that because the handful of loan officers the bank employs must trek to the most remote parts of the area to collect payments, the debts are often not repaid.

Until recently, China has not worried about break-even or even money-losing banking projects. Rural finance was considered to have more of a social-welfare, poverty-alleviation mission than a business one.

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