The Chinese banking regulator has loosened up the non-performing threshold for small and micro-loans amidst broader efforts by Beijing to support financial inclusion in China.
The China Banking and Insurance Regulatory Commission (CBIRC) recently issued the “Notice on Further Raising the Quality and Effectiveness of Small and Micro-enterprise Financial Services in 2019” (关于2019年进一步提升小微企业金融服务质效的通知).
The Notice loosens the non-performing tolerance for financial inclusion loans to small and micro-enterprises to there percentage points above the NPL for all loans, under the precondition that “current small and micro-enterprise loan risk is kept under overall control.”
CBIRC has also outlined the target of the “two growths” (两增) – being that the annual growth rate for financial inclusion small and micro-enterprise loans be no lower than the rate of growth for all loans, and that the number of clients for such loans be higher than the previous year.
The Notice further requires that commercial banks strictly control rates for funds obtained via small-business support re-loans from the central bank or policy bank re-loan, as well as financial inclusion small and micro-enterprise loans that have obtained guarantees from government finance guarantee firms.
Official data from CBIRC indicates that as of the end of 2018 China’s small land micro-enterprise loan balance stood at 33.49 trillion yuan, accounting for 23.81% of all loans.
In the fourth quarter of 2018 the average interest rate for new financial inclusion loans to small and micro-enterprises made by Chinese banks was 7.02%, for a decline of 0.8 percentage points compared to the preceding.