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Microfinance turned into a for profit industry with interest rates upto 100%- $217 billion loans outstanding in 2026 and 140 million borrowers. It has turned into a disaster for borrowers, for women and families, with high interest rates and for profit companies using the favorable media presentation to charge high interest rates. The World Bank and the IDFC public institutions in the US have also financed these loans.

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S. Korea's household debt is now 155% of GDP, according to the OECD. For the last ten years the household debt is growing at 13 percent, double the rate of GDP growth. Korea was not affected to the same extent as other countries by the 2008 financial crisis. As a result household debt continues to grow rapidly. The household debt to disposable income reached 140% in the U.S. before the 2008 financial crisis, according to the IMF. Spain reached a level of 130% before the crisis, according to the McKinsey Global Institute. The Financial Services Commission in S. Korea has taken steps to control this- by imposing limits on bank lending, tighter credit checks by banks, and incentives for shifting to fixed rate mortgages. About 95% of mortgages in S. Korea are adjustable rate mortgages. Housing loan rules in S. Korea require loans to not exceed half of the value of the house, and annual payments of principal and interest cannot exceed 40% of the owners income. This effectively insulates the banks from the effects of a housing bubble. One of the effect of the 1997 financial crisis in S. Korea when it turned to the IMF for assistance, is the relaxing of controls on interest rates to encourage spending in a country that encouraged saving. The result is the growth of a nonbank sector which is not subject to central government regulation by the Financial Supervisory Service. The non-banks are regulated only by local governments and can charge upto 39% compared to 4-6% at banks. Non-banks are also allowed to turn in their licenses and operate charging even higher rates. Each year about a 1000 nonbanks from 18,500 such banks in 2007 are joining the black market according to the Consumer Loan Finance Association, showing the size of the problem of black market lending to low income borrowers. S. Korea has mostly relied on growing GDP to control the situation, but slowing growth could lead to unsustainable levels of household debt....

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Zhou Xiaochuan, is head of the People's Bank of China since 2002. For a long time Zhou has tried to convince party leaders in China to make financial sector changes. The new leadership of Jinping-Li Keqiang has now adopted most of the road map and priorities drawn up by Xiaochuan. The first is bank deposit insurance, which would especially protect small depositors and provide a basis for new private banks to compete with large state owned banks, creating competition in the financial sector. By supporting creation of privately owned banks impetus could be given to loans to the private sector to rebalance the economy away from state owned banks and state owned enterprises. This is a key goal in the road map drawn up by the think tank Development Research Center (DRC) which has the backing of premier Li Keqiang. Competition from new private banks would let banks compete to offer higher rates to depositors, another goal. In a September article for the Communist Party Seeking Truth magazine, Zhou pointed out the pressing need for " supporting private capital to set up private banks and guide them to position themselves in serving small and micro companies." These new companies especially in tech and information technology fields can be the new drivers for growth in the future as the burst of infrastructure building generated growth slows down. The one area Zhou faces resistance is his idea of opening up China to foreign capital inflows and outflows. Here critics,including younger economists, say this protected China in the Asian financial markets crisis of 1997, and would protect China in the event it faces outflows of the type that are happening in India in 2013 after the U.S. Fed's plan to withdraw from its quantitative easing. Xiaochuan sees the flow of foreign capital as another way for capital to flow to new private companies and balance away from the state owned enterprises, and for China's savers to be able to obtain more attractive returns. Zhou says his plan would include the option for China to reintroduce capial controls in a crisis. As China's debt to GDP ratio is set on a trajectory to approach the levels reached in Japan before its banking crisis there is greater awareness from party leaders about the need for prudence. Xiaochuan has worked with party leader Jinping's key economic advisor Liu He for years, and has the support of He and Jinping for introducing deposit insurance as a top priority. President Jinping and Premier Li Keqiang see the need for Xiaochuan's experience and foresight "as a talent who can be counted on," as the sense of importance of changing the economic structure has deepened in 2013. Mandatory retirement for Xiaochuan at 65 was set aside to give him a third five year term, and his road map long ignored by former premier Wen Biao, is now at the top of China's agenda. ...

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Fitch Ratings analyst Charlene Chu tracks unreported debt in China's shadow banking system. She is doing this after moving to China in 2004, following work at the New York Fed. She was first alerted to the increase in unreported private debt when a banker disclosed to her at a meeting that he was pushing loans off the bank's books by repackaging it as securities and calling it wealth management products. She sees shadow lending in the banking system as a way to extend credit beyond the bank's government quota and not disclose questionable loans. The growth in private debt is alarming, much of it unreported. China undercounted private debt by 28% or 1.3 trillion yuan ($212 billon ) in the first half of 2010. In July 2011, the People's Bank of China added many of this type of off-balance sheet type of lending to its figures, following Chu's example. Her figures are still higher and she says conservative estimates. Fitch Ratings puts China's private sector debt at 214% of China's GDP as of June 2013, from 129% in 2008.The central bank's estimate is about 20% lower. Shadow lending soared after China increased lending in 2009 as part of the Stimulus policies. ...

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Risks from estimated $250 billion in bridge loans which banks intended to pass on in the markets but which they now end up holding. These would then end up on Banks balance sheets. Also the problem of conduits of banks and the inability to issue commercial paper to finance their holdings as no one is interested.

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The Bank of Japan reduced interest rates by 0.2 %, from 0.5 % to 0.3%, lowering the overnight lending rate. Citing higher energy prices and lower export demand it lowered the growth forecast to zero for 2008. This is the first time in 7 years that the Bank of Japan is doing this. Japan has never recovered from the real estate and stock market bubbles of the 1980's and interest rates in Japan have been at levels near zero for many years. With low interest rates and a huge deficit Japn has few options left. The small nature of the rate cut is unlikely to increase borrowing or stimulate the economy say experts, but is more of a symbolic move that Japan will coordinate its efforts with other global economies. Even so half of the governing board voted for and half against this cut with central bank governor Maasaki Shirakawa casting the deciding yes vote. Upto now Japn's significant help has been in the form of suppplying yen and dollars to money markets to ease the global credit crisis. Another move is a $51 billion stimulus package that will give income tax rebates to households. Japan would like to pick up the slack in global growth from USA's weakness but is unable to do so because like other Asian economies its growth is export based with low consumption spending at home. This is true also of China and China's need for infrastructure spending is not as great as it once was leaving imports of machinery at lower levels, which gives less support to export driven growth from Germany or the USA....