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SME finance in China

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Key trends in SME finance in China. Limited or little access to ... unfriendly social, legal, and credit environment. Major obstacles to improve SME finance ... – PowerPoint PPT presentation

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Title: SME finance in China


1
SME finance in China
  • key trends in SME finance in China
  • Major obstacles to improve SME finance
  • Policy recommendations
  • Current development

2
Key trends in SME finance in China
  • Contribution by SMEs
  • number 99
  • output 50
  • export 60
  • tax 30
  • jobs 70

3
Key trends in SME finance in China
  • Limited or little access to capital market
  • Share of credit in main banking financial
    institutions 16
  • High NPL ratio compared to corporate lending
  • High reliance on internal and informal finance
    channel

4
Key trends in SME finance in China
  • SMEs funding problems
  • 66 of sample SMEs have difficulty to access
    to finance
  • The lack of funding is the main blockade to the
    developments of SMEs (IFC-CPDF survey)
  • Similar findings from various surveys as
    presented by Dr. Xu and Shen

5
Major obstacles to improve SME finance
  • Macro obstacles
  • Capital market lacks function of financing
    especially for SMEs
  • Insufficient competition in banking sector
  • Interest rate cap until recently
  • Address SMEs finance as a social objective, not a
    commercial business Can SMEs afford high IR?
  • unfriendly social, legal, and credit environment

6
Major obstacles to improve SME finance
  • Micro obstacles
  • Banking Inst. lack of core credit tech.
  • Credit culture and credit mgt. policy not
    adaptable to SME lending
  • Information asymmetry
  • Poor corporate governance

7
Policy recommendations
  • Develop capital market
  • Increase the level of competition of the banking
    sector, push for down-market, more banking
    establishment
  • Promote commercial viability of SME lending new
    way of thinking
  • Remove IR cap
  • Improve social, legal and financial
    infrastructure

8
Policy recommendations
  • Improve corporate governance
  • cultivate right credit culture and advocate
    institutional reform in credit area talents and
    risk-based pricing
  • Capacity building in banking sector for SME
    lending
  • SMEs more open to lenders

9
Current development
  • Credit guarantee schemes
  • public and private owned 4,000
  • guarantee capability
  • funding resource
  • Banks suspicion on CGSs
  • Overall efficacy limited
  • Controversy over the effect of CGSs

10
Current development
  • Lending rate cap removed by central bank in Sept.
    2004
  • Pilot-trial project of lend-only MFIs in several
    provinces
  • Guideline on MSE Lending of Commercial Banking
    Inst. In July, 2005 a major revolution in
    introducing commercially sustainable MSE lending
    and promoting institutional and product
    innovation

11
Current development
  • Credit bureau
  • Improve legal infrastructure Law on property,
    Law on bankruptcy, etc.
  • Gov. at local levels come to help improving the
    social and credit environment
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