Fullerton Credit: Leverage cap for selected MFIs can be lifted

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03:43

Much has been reported about the disproportion between the contributions of small and micro-sized companies to China's economic growth and their access to financial support.

Various official statistics showed loans given out to the subsector made up more than 30 percent of financial institutions' books, despite their 60 percent contribution to the country's GDP.

Against this backdrop, Fullerton Credit, a foreign lender operating in China for 10 years, has called for the expansion of credit to be extended to the micro lending ecosystem.

"There should also be the consideration to see whether the leverage cap can be lifted for micro-finance institutions (MFIs) that are well-governed. At about 2.5 times now, it certainly restricts the amount of loans MFIs can give out to small and micro enterprises," Fullerton CEO Mark Lim told CGTN.

Lim pointed out the disparity between the leverage cap for consumer finance companies – at 10 times which is four times more that of MFIs. "It could be a balance in between," he said.

"Additionally, funding sources for these MFIs could also be widened to allow more support [for us] to do more loans to small and micro enterprises."

Mark Lim (L), CEO of Fullerton Credit Services Group, speaks with a CGTN reporter. /CGTN Photo

Fullerton Credit is funded by its parent company Fullerton Financial Holdings (FFH) and banks. FFH is wholly owned by the Singapore government-owned Temasek Holdings.

Headquartered in Chengdu, Sichuan Province, Fullerton Credit has been serving China's self-employed mass market since January 2009. "It's part of our parent company's agenda to do SME financing in emerging markets," Lim said.

For the financial year ended December 31, 2018 (FYE 2018), it raked in a net income of 81 million yuan, with a return on equity (ROE) of 4.6 percent – an improvement from a net profit of 29.7 million yuan and ROE of 1.8 percent in FYE 2017.

A farm stay business in Dujiangyan, just two hours away from Chengdu city, said it was almost impossible to get a bank loan due to the lack of collateral. /CGTN Photo

Lim said China remains a critical market for Fullerton Credit, and that it is determined to compete long-term in the country.

"China is a very huge market if you're able to get a certain share of it, no matter how small, it's already fairly significant," he said.

"We also need to innovate. We are investing heavily in technology as well as have online processes. I still believe that in the business lending space you need to have both online and offline integration in order to do your customer selection in a more creditworthy manner.

"Two, it's a very exciting market, very high up on fintech evolution. I think if we do well we'll be able to benefit from the experience that we learn in China across the other markets that we are currently operating in the world."

Lim cites operating viability as one of the biggest hindrances for small enterprises to get loans. That, and the availability and accessibility of borrowers' information.

"I think the [Chinese] government is also doing a lot in this area to try to encourage borrowers to maintain a good lending credit bureau record so that would allow them to get more loans in the future. I think that's a very important development if small and micro-financing were to be further supported in the future – credit bureaus and availability of information."