There are two methods for Microcredit Companies (MCCs) to raise capital: raising equity or taking on debt. In theory these are both viable options; in practice MCCs face significant obstacles with both channels of funding. MCCs are regulated at a provincial level and therefore regulations vary from province to province. Some provinces place a cap on the registered capital a MCC can raise. On the other hand, despite the People’s Bank of China and China Banking Regulatory Commission’s push to ease limitations, debt in the form of bank lending remains difficult for MCCs.
On June 20-21st, 2010, the “First China Microfinance Innovation Forum” was held jointly by the China Society for Finance & Banking and Zhejiang Provincial Government in Hangzhou. The aim of the forum was to promote microfinance, share experiences, guide and standardize innovations in technology in the field of microfinance, upgrade risk management, and push for further national sustainability within the industry.
On June 8, 2010, Alibaba Group, in partnership with Fosun Group, Intime Department Store Group, and Wanxiang Group, established China’s first e-commerce Microcredit Company (MCC). This newly established MCC, called Zhejiang Alibaba Microcredit Company (ZAMCC) and based in Hangzhou, Zhejiang province, will provide microcredit loans of RMB 500,000 or less to small- and medium-sized enterprises (SMEs). The aim is to support SMEs with temporary funding, as they are often denied in traditional banking loans.
June 13, 2010, PICC Life Insurance (PICC), under the People's Insurance Company (Group) of China Ltd, won approval from the China Insurance Regulatory Commission (CIRC) to develop a rural individual life microinsurance (MI) pilot program in 16 Chinese provinces and municipalities.
The Central People's Government of the People's Republic of China
June 9, 2010
On June 8, 2010, the People’s Bank of China (PBoC) published the “2009 Report on Regional Financial Operations in China” reviewing the financial sector in each of China’s provinces in the last year. The report comprises of an overview of trends and movements in China’s financial markets, as well as more-detailed provincial profiles and statistics. In the country overview, specific details were provided regarding rural finance. Some important figures relating to rural economy showcased in the report include:
“This release is important because it reflects how the government is finally beginning to realize how expensive and difficult it is to fund rural lending in general. This tax reduction thus clearly shows the government’s recognition to alleviate the tax burden on these banks that support rural lending. For the ABC and other rural lending banks, this is simply part of the government’s carrots-and-sticks in balance-performance versus social responsibility.”
PlaNet Finance China Winter/Spring 2010 Newsletter
March 25, 2010
In February 2010, Zhou Xuedong, Director-General of the Regulatory Department of the People’s Bank of China (PBoC, the central bank) announced in the local financial press that the PBoC is planning certain policies pertaining to microcredit companies (MCCs) that could make this model more profitable and sustainable. MCCs are specialized lending companies that piloted by the PBoC starting in 2005 to expand micro-credit access in China. As of 2009 year end, there were 1,334 registered MCCs.
After several years in the making, Accion has finally opened the 2nd foreign-funded microcredit company in China! Located in Chifeng Prefecture of Inner Mongolia, Accion Microcredit China (AMC) was inaugurated on March 4, 2010 and as of early December 2009 has already begun distributing loans. PlaNet Finance China is delighted to hear of AMC's opening and the addition of another mission-driven microfinance organization into China's microfinance landscape.
