Chinese banks tightening lending to small businesses
(8 June 2016 – China) Chinese commercial banks have tightened control on loans to point of sale (POS) retailers, reports indicate.
The move shuts the door on yet another channel for convenient credit for small and micro businesses as well as self-employed entrepreneurs.
Banking industry sources say banks are more cautious about lending to small and micro businesses amid a slowing economy.
Retailer loans required no collateral and were issued quickly as banks were able to make risk assessments using big data evaluation of an enterprise's sales turnover and personal credit information.
The POS loan service was touted as a major innovation when many banks collaborated with third-party payment services as it entered use around the end of 2014.
"Some banks even lent online," a source has told Chinese publication Guangdong Daily.
However, banks later became wary of elevated levels of risks following the discovery of falsified sales figures by some retailers amid a softer economic landscape. As loan books were more greatly affected by the number of bad loans, many banks began to tighten lending, sources have said.
Although the service has not been completely stopped, is no longer publicised or promoted.
China Banking Regulatory Commission (CBRC) says the country’s small and micro enterprises had less desire to expand as a result of pressure from a slowing economy, meaning appetite for financing also decreased.
The regulator added that at the end of the first quarter, bad loan rates from the segment slightly increased to 2.7 percent.
Banks now consider mortgage loans for housing and lending to government projects more prudent, despite lower profitability, an insider told the paper.
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