Arab Today, arab today big chinese banks faking loans to small firms
Last Updated : GMT 05:08:08
Arab Today, arab today
Arab Today, arab today

Big Chinese banks faking loans to small firms

Arab Today, arab today

Arab Today, arab today Big Chinese banks faking loans to small firms

Beijing - Arabstoday

China\'s big banks are not delivering on their promise to lend more to the smallest firms and are instead \"faking\" their micro loans, a researcher said, suggesting a government drive to increase micro-lending is struggling.Ba Shusong, a researcher from the Development Research Center, a think-tank that advises China\'s Cabinet, said the biggest Chinese banks are still setting tough collateral standards for small firms, which often cannot meet the demands.This leaves 60 percent of small Chinese firms without bank financing, Ba said, citing a study that he led on funding conditions for small and micro-sized firms.China wants to increase financing for its small businesses and has ordered its state-controlled banks to step up lending to them to avoid a repeat of a 2011 cash crunch, which some analysts had worried could destabilize the banking system.\"Everyone right now talks about financing for small and micro-sized firms,\" Ba said. \"There is a portion of big banks who are faking their lending to small and micro-sized firms,\" he told a forum in Boao in Hainan over the weekend, without further details.The study that surveyed 1,000 small and micro-sized Chinese firms across a dozen sectors showed only 40 percent of them have loans from banks right now.And despite China\'s central bank cutting interest rates twice by a total of 50 basis points last year to spur a domestic economy trapped in its worst downturn in 13 years, the study said 66 percent of firms have not seen their funding costs fall.Instead, 40 percent of firms said they pay interest rates of more than 10 percent, while the rest have financing costs of 6-10 percent. A third of companies said financing costs are their biggest cost.China\'s one-year benchmark interest rate, targeted by the People\'s Bank of China when it changes monetary policy, stands at 6 percent.\"The lack of appropriate collateral is one of the basic sources of financial difficulty for small and micro businesses,\" the study said.Banks often demand companies to stump up property as a collateral or a guarantee before they get a loan, it said, even though the survey showed 83 percent of businesses do not own their own factory space.The study recommended banks expand their pool of acceptable collateral to include orders, warehouse warrants, equity and intellectual property.Though modest in size, small businesses punch above their weight in China, accounting for three of every four jobs and 60 percent of the country\'s output. source : Shanghai Daily

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