The Asian Development Bank (ADB) offered to invest US$10 million in one of China's leading private credit guarantee companies, Credit Orienwise Group Ltd (COG), when the joint venture was officially launched on Friday.

"The investment provides a great support to China's guarantee industry," said Di Na, an official from the National Development and Reform Commission.

Integrating six guarantee firms in cities such as Shenzhen, Beijing and Shanghai, COG specializes in guaranteeing loans for small and medium-sized enterprises (SMEs).

It has been successful in providing a credit assessment service and risk mitigation mechanism previously unseen in China's financial system.

Integral to its investment, the ADB contributed to the successful restructuring of COG to enable the company to position itself for further business growth, said Zhang Kaiyong, chairman of COG's board of directors.

ADB's investment will be used mainly to improve COG's internal information technology system, increase its capital reserves, and help it expand from its base in Shenzhen to further Chinese cities.

"SMEs are key drivers of employment, economic growth, and development. However, more than 80 percent of China's SMEs have difficulty in accessing financial services and securing financing, while commercial banks lack experience and incentives for assessing SME credit risk," said William Willms, an ADB Principal Investment Officer.

"The ADB's investment will support further SME growth by increasing access to financing, thereby enhancing sustainable private sector employment and contributing to the development of the country," he added.

In addition, an ongoing technical assistance grant from the ADB is helping improve access to financing for SMEs in China by promoting the development of SME credit guarantee companies through an effective policy and regulations as well as providing an operational framework, according to ADB officials.

With assets of more than 1.2 billion yuan (US$144 million), COG is mainly based on Shenzhen Credit Orienwise, China's largest privately owned credit guarantee.

(China Daily April 9, 2005)