Emphasis on inclusive finance in loans expected to create key client category

Banks have stepped up efforts to provide more effective support to small businesses by using financial technologies and better sharing enterprise credit information among lenders and government agencies, as China endeavors to promote high-quality development of inclusive finance.

During a recent meeting of the Central Committee for Deepening Overall Reform, President Xi Jinping said China will promote high-quality development of inclusive finance and build a sound financial system, which is highly adaptable, competitive and inclusive, to better meet the diversified financial needs of the people and the real economy.

The country will strengthen supervision and assessment to promote a marked increase in inclusive loans to micro and small businesses and a further rise in the proportion of collateral-free loans and first-time loans, said this year's Government Work Report delivered by Premier Li Keqiang at the fifth session of the 13th National People's Congress on March 5.

Last year, China CITIC Bank Corp Ltd, a national joint-stock commercial lender, offered loans totaling 6.89 million yuan ($1.08 million) to GSY Biotechnology, a Jinan, Shandong province-based company specializing in the development and export of veterinary-use products.

After due diligence was conducted online and offline, GSY Biotechnology went through the loan application process online and China CITIC Bank granted approval online for issuance of one-year, collateral-free loans to the company at an interest rate of 4.2 percent.

The bank launched an online collateral-free loan product for technologically advanced small enterprises based on analyses of their credit reports and other types of data, including those provided by the administration for market regulation at various government levels and judicial branches.

The product demonstrates the bank's attempts to engage in digital inclusive finance, which involves the deployment of digital means to reach currently financially excluded and underserved businesses and populations with a range of financial services suited to their needs.

"We will promote the sharing of enterprise credit information and move faster to achieve information sharing between financial institutions and tax offices, Customs, electric utilities and other agencies," said the Government Work Report.

It added that China will channel more funds into key areas and weak links, and expand the coverage of inclusive finance.

Xu Jianfeng, vice-general manager of the inclusive finance department at Bank of China's Zhejiang branch, said BOC has been seeking advice from local governments' science and technology bureaus, industrial park administrative committees and institutional investors that have a fairly deep understanding of tech companies, especially tech startups whose sales value is negligible.

"After considering the opinions of all parties, we assessed the comprehensive capabilities of a business team, the technological value and prospects of a tech company, and the market potential of its products," Xu said.

The bank also worked with internal and external investment funds in terms of customer introduction and venture lending－a type of debt financing designed for early-stage, high-growth companies with venture capital backing.

Nearly 85 percent of bankers polled listed inclusive finance as a development priority for China's banking sector during the 14th Five-Year Plan period (2021-25), according to a survey jointly released by the China Banking Association and PwC on March 2.

The survey found that 74.5 percent of the bankers regarded small and micro business loans as the top priority of corporate finance in 2021. Nearly 80 percent of the bankers said small and self-employed businesses will be a key client category for the banking sector in the next phase.

By the end of 2021, the balance of loans to small businesses that have a total credit line of up to 10 million yuan per borrower was 19.1 trillion yuan, up 24.9 percent year-on-year, according to the China Banking and Insurance Regulatory Commission.