Precise Credit Services for Micro and Small Enterprises

In recent developments, the National Financial Supervision Administration of China has released pivotal data highlighting the proactive steps taken to foster financing mechanisms for small and micro-sized enterprises (SMEs). As of the end of November, the initiative has reportedly engaged with over 12 million small businesses across various provinces, with approximately 1.94 million of these businesses being included in a registration list, while around 1.30 million qualified for a recommendation listThis effort has culminated in banks extending a whopping 2.2 trillion yuan in newly approved credit and disbursing loans amounting to 1.2 trillion yuan, demonstrating a robust commitment to enhancing financial accessibility for SMEs.

The impetus for these measures stems from a growing recognition of the role of small businesses in the economyIn recent years, multiple governmental departments have introduced numerous strategies aimed at guiding banks to intensify their inclusive financial services

The collective push reflects a concerted effort to buoy the economy by addressing the unique challenges faced by small enterprises, which often struggle to obtain adequate financing.

In the current fiscal year, detailed strategies aimed at supporting SME financing have been meticulously mapped outCong Lin, the Deputy Director of the National Financial Supervision Administration, emphasized that the cornerstone of this initiative is the establishment of specialized teams at the county and district levels, which serve as vital bridges connecting financial institutions and businessesThese teams aim to gain comprehensive insights into local enterprises' operating conditions, thus facilitating precise assistance to mitigate financing hurdlesAt the same time, there’s a concerted effort to alleviate bottlenecks in information flow and financial transactions between banks and businesses.

Various regions have been proactive in their endeavors to assess and respond to the financing needs of businesses

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• Precise Credit Services for Micro and Small Enterprises

For example, in Chengdu's Xindu District, the local government has initiated collaborations with major state-owned banks to create platforms for information exchange and resource sharing, thus addressing the financing challenges faced by small businesses from multiple anglesIn Dan Yang, Jiangsu Province, banks and tax departments are working in tandem, utilizing combined data resources to ascertain credit limits that can adequately meet the diverse credit needs of SMEs.

Over the years, China's inclusive microfinance sector has seen a notable expansion in its scale and qualityRecent statistics from the third quarter of 2024 indicate a continued rapid growth trajectory for loans in the inclusive finance arenaBy the end of the third quarter, the balance of Renminbi inclusive microloans surged to approximately 32.9 trillion yuan, marking a year-on-year increase of 14.5%. This growth rate surpasses that of overall loans by a significant 6.4 percentage points and reflects an increase of 3.51 trillion yuan in just the first three quarters.

However, with the increased credit support for SMEs, a troubling trend has emerged among some grassroots credit personnel who have developed a reluctance to engage with this sector

Such hesitancy is often rooted in the asset-light nature of many small businesses which tend to lack sufficient collateral and display limited risk resilienceThis fear can manifest as an aversion to lending, stemming from concerns that the collapse of capital chains might precipitate an uptick in bad debt riskIndustry experts argue that a balance must be struck between advancing development and mitigating risksBanks must actively engage with SMEs to refine credit services while fostering a positive environment that encourages responsibility and proactive engagement in risk management.

To address the need for a more encouraging atmosphere for front-line credit workers, financial regulatory authorities are continuously refining their oversight frameworksThey are advocating for a sustainable system that promotes willingness among lenders to extend creditThis involves not only enhancing service quality but also creating mechanisms that empower credit personnel to confidently support the vibrant growth of small businesses.

Li Yifan, a researcher at the Bank of China’s Research Institute, underscores the necessity for financial institutions to meticulously delineate each process involved in their SME credit operations

This includes ensuring alignment with regulatory requirements and increasing outreach to small business customers to heighten market expectations and ensure smoother credit operations.

As the forward trajectory continues, banks are encouraged to diversify and differentiate their financial services aimed at small enterprisesCurrently, rural commercial banks are honing in on the effective needs of SMEs by ramping up their efforts in providing interest-free renewals of loans, thereby reducing operational liquidity costs for businessesMeanwhile, urban commercial banks and major state-owned banks are expediting the implementation of coordination mechanisms to enhance financing support for SMEs, such as organizing large-scale outreach initiatives to better understand the operational dynamics of various companies.

Li Yifan articulated the role of large and medium-sized banks as the primary drivers of financial service innovation

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