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China regulator tells banks to lend to small business

China regulator tells banks to lend to small business

(11 October 2006 – China) China’s Banking Regulatory Commission (CBRC) has issued guidelines aimed at boosting loans to the country’s small business segment. The CBRC wants commercial banks to KPI their credit officers against the amount of good credit quality loans made to small businesses.

The move is a response to the difficulty small businesses experience in obtaining loans as banks prefer to lend to larger companies where returns and the likelihood of repayment are stronger.

Many small businesses have been forced to obtain debt from less salubrious sources, typically the black market, because commercial banks have not been forthcoming with loans.

As a result of the CBRC’s plan, credit procedures for small businesses will be simplified and also offer greater flexibility on interest charges and repayment. Banks have also been encouraged to make greater efforts in understanding small business when it comes to assessing credit risk.

The regulator said it excluded medium sized enterprises in the guideline as their credit management was similar to big enterprises – "while for small companies credit is more complex and difficult".

Chinese bank loans to small and medium sized enterprises topped 2.64 trillion yuan (US$334 billion) as at 30 June.

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