An estimate attributed to China’s Ministry of Industry and Information Technology indicates that 15 percent of small and medium-sized enterprises (SMEs) in China are able to secure loans from banks. However, SMEs often pay interest rates of between 20 and 50 percent more than is charged to large enterprises. The number of SMEs reportedly increased sevenfold between 2008 and 2011. The firms may be funded by shareholders, bank loans and donations. Of loans made by Chinese microcredit lenders, 70 percent have terms between three and six months with about 30 percent having terms of one year or longer. Loans are typically in amounts less than RMB 2 million (USD 317,000).
Because demand for loans significantly exceeds supply, the government has launched an initiative to promote an increase in the quantity of microcredit lenders. Details on the effort remain few.
By Natalie Baer, Research Associate
Sources and Additional Resources:
[1] Can Microcredit Lenders Fill the Gap? http://www.piie.com/blogs/china/?p=1160
MicroCapital story, March 6, 2012, “MICROCAPITAL BRIEF: China Association of Microfinance (CAM), China International Center for Economic and Technical Exchanges, Peking University, CreditEase Microcredit Investment Launch Inclusive Finance Wholesale Fund,” https://www.microcapital.org/microcapital-brief-china-association-of-micr…
MicroCapital story, March 6, 2012, “MICROCAPITAL BRIEF: People’s Bank of China, PlaNet Finance Research Project Aims to Upgrade Microfinance Risk Management” https://www.microcapital.org/microcapital-brief-peoples-bank-of-china-pla…
MicroCapital story, February 22, 2012, “MICROCAPITAL BRIEF: Number of Microfinance Institutions in China Hits 4,282,” https://www.microcapital.org/microcapital-brief-number-of-microfinance-in…
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