Bank Lending Reform Helps Small Business
BEIJING, February 5 (Xinhua) -- A finance program has been proposed to the People's Bank of China (PBOC) to allow a wider fluctuation range of current lending interest rates to small and medium- sized enterprises, says the Tuesday-published China Daily.The proposal was made by a leading international consulting firm in micro and small enterprise finance, and has yet to be approved by PBOC, China's central bank, says the paper.
The program would ensure China's small and medium-sized enterprises (SMEs) have an easier time obtaining bank loans for business expansion, by making this financial service more profitable to banks.
It proposed that China's commercial banks could charge higher lending rates and secure larger net interest margins, to offset the higher costs and risks involved in making SME loans.
According to the paper, specialists invited by the World Bank and the PBOC are now conducting a feasibility survey in Beijing toprepare for the implementation. And some domestic financial institutions will be carefully selected to test the new program.
China's existing narrow interest rate margins were considered amajor constraint for banks lending to SMEs. And commercial banks could not make handsome profits from SME lending, which is more costly than lending to large State-owned enterprises.
Considering China's still tight restrictions in interest rates,the paper says that the 30 percent increase for SME lending is notsufficient to make it a profitable financing service.
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