The government of Guangyuan City, southwest China's Sichuan Province, announced on December 17 to
solicit investors for a piloted microlending company.
This is the new efforts of the People's Bank
of China, the country's central bank, to quench the small and
medium-sized enterprises' thirsty for capital, and a major measure
to regulate the underground lending activities.
In mid 2005, the central bank decided to conduct pilot program
of microlending firms in Shaanxi, Sichuan, Guizhou and Shanxi
provinces. This May, Pingyao County of Shanxi Province and Jiangkou
County of Guizhou Province initiated bid invitations. Rishenglong
and Jinyuantai went into operation in Pingyao on December 27. They
symbolized the official establishment of first batch of private
banking companies since the founding of the People's Republic of
China in 1949.
The business scheme of Guangyuan microlending firm has been
approved by the central bank's local branch and the Sichuan
provincial government. According to the pilot scheme, the deadline
for the bid registration was as of December 30; its registered
capital shall be no less than 5 million yuan (US$0.62 million) and
there is no ceiling limitation; it can have a maximum of five
shareholders; money depositing business is forbidden and the pilot
term is usually two to three years.
"Currently, a dozen bidders have registered for the bidding,
mainly from Shanghai Municipality, and Zhejiang and Sichuan
provinces," said an official from Fiscal Office of the Guangyuan
municipal government, the bidding organizer.
According to a Li-surnamed director of the central bank's
Guangyuan branch, the pilot scheme will stick to two principles: it
only deals with lending businesses rather than money depositing; it
can only operate in the Shizhong District of Guangyuan City,
serving local farmers, individually run businesses and small
enterprises.
Other requirements include: each loan amount is no more than 2
percent of the registered capital; loan period is less than one
year; lending rate can be negotiated between the lending firm and
borrowers, but it should not exceed the 4 times of central bank's
current lending rate.
The firm's profitability prospect wins many investors' favor
despite that local government gives no preferential policies.
The current one-year benchmark lending rate is 5.14 percent, so
the maximum rate of Guangyuan lending firm could be 20.56 percent,
much higher than the average 10 percent rate of domestic rural
credit cooperatives.
The Guangyuan microlending firm is currently categorized as a
non-banking institution, so it will be supervised by the central
bank. Though this blurry identity might cause some unseen problems,
both the central bank and banking regulatory commission prefer to
have the lending firms set up first, and put forward a unified
management rule later on.
The new firm was previously scheduled to complete business
registration procedures before January 25, 2006, but a local
official said the date had been adjusted.
(China.org.cn by Tang Fuchun December 31, 2005)