Inclusive finance helping SMEs in China thrive

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The push for inclusive finance by Chinese authorities is helping small and medium-sized enterprises (SMEs) borrow money on the cheap in a bid to spur economic growth.

In the eastern city of Ningbo, small and medium-sized companies are the driving force of the local economy, accounting for 70 percent of the taxes collected in the area and providing 90 percent of all jobs.

But these firms face a familiar obstacle: the inability to borrow money with affordable interest rates due to lack of collateral.

Jiang Zhengrong, CEO of Zhejiang Martian Corporation, told CGTN that his company was able to clear this hurdle thanks to inclusive finance policies.

“We faced a capital bottleneck in the first half of 2015 when we tried to expand our businesses, as a light assets company,” said Jiang.

“But the local government helped us to connect with Hangzhou Bank to get a loan of 2 million yuan at the benchmark interest rate. 2 million yuan doesn’t seem a lot, but it could actually help leverage capital and resources of over 20 million yuan.”

The Chinese government has offered various incentives to large and medium-sized banks, encouraging them to extend micro-loans and other basic financial services to SMEs. These perks include targeted cuts to their reserve requirement ratios, and tax relief.

Yu Liyong, deputy director of Ningbo Finance Office, said that in places like Ningbo, these measures mean capital-starved SMEs will gain access to cash to help them get through tight spots, or offer chances to expand.

“We provide a comprehensive range of services to make SMEs bigger and stronger. For the most promising ones, we also invite venture capitalists to help them get on the fast track of going public. This year, we have had 20 SMEs get listed, and this explosive growth has been made possible by inclusive finance.”

As of June, loans for small and micro businesses had reached 28.6 trillion yuan. That’s around 4.3 trillion US dollars, up nearly 15 percent year on year.

Small and medium-sized enterprises have become one of the major pillars of the Chinese economy. Now, the fast development of inclusive finance is helping China’s SMEs solve the issue of financing, helping them not only survive, but thrive.