MICROCAPITAL.ORG STORY: Hong Kong and Shanghai Banking Corporation (HSBC) Partners with Women’s World Banking (WWB) to Launch Loan Product for Small Businesses and Rural Workers in China

The Hong Kong and Shanghai Banking Corporation (HSBC), the fifth largest bank in the world with a market value of USD 104.2 billion, has partnered with Women’s World Banking (WWB), a non-profit that provides support and training to a network of 40 microfinance institutions (MFIs), to launch a product called “happy loans” [1, 2, 3]. The product aims to provide financial services to small businesses and rural workers, particularly farmers, who struggle to obtain loans due to the seasonality of their businesses, which cause variable cash flows.

HSBC was the first foreign bank to enter China’s rural market, opening its first rural bank, the Hubei Suizhou Chengdu HSBC Rural Bank, in December of 2007 with USD 1.4 million in capital [4, 5]. The Hubei Suizhou Chengdu HSBC Rural Bank and the Chongqing Dazu HSBC Rural Bank are the first HSBC rural banks to pilot the “happy loans” product. HSBC plans to extend the lending product across all five of its rural banks. WWB will provide technical support and training for HSBC local staff. WWB’s network of MFIs span across 28 countries, but this will be its first project in China [6].

Growth of HSBC’s micro-lending activities evidences increasing market opportunities for microfinance in China. As discussed in a previous MicroCapital story, in response to the global financial crisis, the Chinese government has been relaxing credit controls. Lower deposit and lending rates are making it easier for MFIs to penetrate the market [7]. By December of 2008, three years after the People’s Bank of China founded the country’s first MFI, more than 200 MFIs were operating in China [8].

Foreign competitors include Citigroup Inc., which opened two rural branches in China last year; and Standard Chartered, with one rural branch in Inner Mongolia [9]. Additionally, Grameen Trust of Bangladesh recently announced plans to establish Grameen China, which will consist of two branches in Sichuan Province and two in Inner Mongolia [10].

By: Stefanie Rubin, Research Assistant

Bibliography:

[1] Women’s World Banking Press Release: “HSBC and Women’s World Banking Partner to Provide Financing to Rural China”: http://www.prweb.com/releases/2009/10/prweb3035924.htm

[2] Guardian.co.uk: “The Top 50 World Banks, Ranked by Assets and Market Value”: http://spreadsheets.google.com/pub?key=phNtm3LmDZEOoyu8eDzdSXw

[3] Caijing.com.cn: http://www.caijing.com.cn/2009-10-13/110280822.html

[4] GTZ: “Microfinance Landscape in China Opportunities for Investors”:

[5] China Daily: “More Join in Rural Banking”: http://english.people.com.cn/90001/90776/90884/6373344.html

[6] Women’s World Banking Network: http://www.swwb.org/wwb-network

[7] MICROCAPITAL.ORG STORY: Relaxed Credit Controls In China May Open Market Opportunities for Microfinance

[8] MIX Market: Rishenglong: http://www.mixmarket.org/mfi/rishenglong

[9] MICROCAPITAL.ORG STORY: The Push and Pull of China’s Microfinance Expansion

[10] MICROCAPITAL.ORG STORY: Grameen Trust of Bangladesh Partners with Alibaba Group to Create Grameen China, With Initial Focus on Bringing Microfinance to Sichuan Province