China Accelerates Financial Inclusion Lending in First Quarter of 2019

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Data from the China Banking and Insurance Regulatory Commission (CBIRC) points to a sizeable acceleration in financial inclusion lending since the start of 2019.

As of the end of the first quarter 2019, the financial inclusion micro and small-enterprise (MSE) loan balance of China’s big five state-owned banks was 1.99 trillion yuan, accounting for 19.94% of nationwide financial inclusion lending.

The financial inclusion MSE loan balance has risen by 16.85% since the start of the year, while the number of financial inclusion borrowers stood at 2.913 million, for an increase of 452,200.

CBIRC data further indicates that the big five state-owned banks have already completed 55.31% of the lending plan formulated at the start of 2019, while the average rate for their new financial inclusion MSE loans was 4.76% in the first quarter, for a decline of 0.13 percentage points since the fourth quarter of 2018.

CBIRC vice-chair Zhu Shumin (祝树民) said at a routine press conference held by the State Council on 25 April that the authority had made specialist arrangements directed at China’s larger banks on the basis of prior regulatory guidance, requiring them to formulate independent financial inclusion MSE loan plans and set annual growth targets of 30%.

In future CBIRC will continue to drive reductions in MSE lending rates, as well as drive reductions in the various additional fees for MSE financing.

Future measures include:

  1. Banking sector financial institutions reducing other additional costs associated with MSE financing by raising their loan share;
  2. Requiring that the banking sector “only collect interest and not fees” under the precondition that there are no other actual services, and strictly prohibiting banking sector financial institutions from collecting fees aside from MSE loan interest;
  3. Driving guarantee organisations and in particular government finance guarantee organisations to reduce guarantee fees for MSE guarantee loans, as well as requiring that government finance guarantee organisations in principle keep guarantee fees under 1% for MSE loans of under 5 million yuan, and under 1.5% for MSE loans of over five million yuan;
  4. Encouraging local governments to reduce assessment fees, notarization fees and other fees during the process of MSE financing where possible, or to provide corresponding subsidies;
  5. Reduce other financing costs.

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