The People’s Bank of China, the nation’s central bank and financial services regulator, recently reported an increase in the number of micro-credit companies to 5630 by the end of September 2012, which represents a 48 percent year-on-year growth in the sector. According to the central bank, Jiangsu Province of East China had the highest number of microcredit companies with a record of 465 by the end of third quarter, 2012. Though there has been a rapid rise in the number of microcredit companies in the first three quarters of 2012, the ratio of new loans given out by microcredit lenders has increased more slowly, indicating signs of economic slowdown and poor management of these firms.
Microcredit companies issued a combined total of CNY 141.4 billion (USD 22.6 billion) in new loans in the first three quarters of 2012, up 2.5 percent year-on-year, according to the central bank. In a statement attributed to Mr Han Jianli, deputy general manager at micro-credit firm Beijing Guoxu Small Loan Co, “The new loans grew more slowly in the first three quarters this year partly because of reduction in demand from small and medium-sized enterprises (SMEs) hit by the economic slowdown. Some SMEs turned to the commercial banks, who have more money available for lending as the central bank has loosened liquidities.” The Chinese central bank had lowered its reserve requirement ratio for commercial banks and financial institutions in October 2012, following the tight liquidity situation indicated by the Shanghai Interbank Offered Rates (Shibor), which have recently hovered around 3.5 to 3.6 percent. Analysts have estimated that this move will release liquidities totaling CNY 820 billion (USD 136 billion) into the country’s financial system.
By Chioma Okwudiafor, Research Associate
About People’s Bank of China The People’s Bank of China is the central bank of the People’s Republic of China. It is responsible for designing and implementing monetary policy. In 2000, the People’s Bank of China established Rural Credit Cooperatives, which are a significant source of microcredit in China. The People’s Bank of China has also established government-run microfinance institutions in six provinces on a pilot basis. As of 2011, the Bank’s total reserves were USD 3.2 trillion.
Sources and Additional Resources:
Global Times Story: “Microcredit Lenders jump in number, new loans increase” http://www.globaltimes.cn/NEWS/tabid/99/ID/743031/Micro-credit-lenders-jump-in-number-new-loans-increase.aspx
MicroCapital Universe Profile: People’s Bank of China https://www.microcapital.org/microfinanceuniverse/tikiindex.php?page=People%27s+Bank+of+China
MicroCapital Story: March 6, 2012: “MICROCAPITAL BRIEF: People’s Bank of China, PlaNet Finance Research Project Aims to Upgrade Microfinance RiskManagement” https://www.microcapital.org/microcapital-brief-peoples-bank-of-china-planet-finance-research-project-aims-to-upgrade-microfinance-risk-management-2/
MicroCapital Story: January 24, 2012, “MICROCAPITAL BRIEF: Microfinance Institutions in China Report $58b in Outstanding Loans” https://www.microcapital.org/microcapital-brief-microfinance-institutions-in-china-report-58b-in-outstanding-loans/
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