Just a few hours ago, Wokai announced that it will be concluding operations indefinitely. The microfinance nonprofit previously had the full confidence of the local community, having raised over half a million dollars in loan capital, garnered a network of thousands of investors and been featured by several major media (including CNN, Bloomberg and MSNBC). The shutdown has come as quite a shock to many, who last heard that the organization was simply seeking a new CEO.

The email sent out by Casey Wilson, Wokai's co-founder and CEO, reads: “Wokai has been actively searching for a new CEO to take the organization to the next level in China. However, as of our application deadline, no clear candidate came to the fore. In addition, we have met unexpected funding road blocks, which have left us without the reserves necessary to extend the search further.

"Considering Wokai’s current situation, our Board of Directors has unanimously decided to take the resources that we currently have and wind down Wokai’s operations.”

She is quick to point out that Wokai has funded over 1,500 micro-loans to 961 borrowers, which means they have supported over 4,000 people in jump-starting the process of moving out of poverty. Ms. Wilson also reassures contributors that their remaining funds will continue to “provide a continuous cycle of new loans to micro-entrepreneurs in China’s rural Sichuan and Inner Mongolia Provinces.”

She concludes: “Even as Wokai winds down, the legacy that we’ve built together will continue on, empowering a generation of micro-entrepreneurs to achieve their dreams and laying the groundwork for the future growth of microfinance in China.”

This nonprofit’s closure comes amidst growing public skepticism about the effectiveness of microfinance as a concept. The Guardian cites critics who argue that “it’s a strategy that manages poverty rather than transforming it.” The Boston Globe says microcredit “doesn’t translate into gains for the borrowers … In fact, most microcredit clients actually spend their borrowed money not on a business, but on household expenses, on paying off other debts or on a relatively big-ticket item like a TV or a daughter’s wedding.”

On the other hand, many economists have admitted that while its impact is difficult to measure, if you look at the simple facts (i.e. microfinance has built thriving industries in the past), its success is undeniable. This article gives a fair assessment on its benefits and risks.

We have already contacted Wilson but are still awaiting further comment. To read our 2010 interview with her, click here. In the meantime, stay tuned to TheBeijinger.com for other ways you can contribute to poverty-relief efforts, or visit our directory for a list of active volunteer groups, charities and NGOs.

Photo: Brant Ward from the San Francisco Chronicle