Lending to small firms encouraged

By Wang Lan (China Daily)
Updated: 2008-08-20 09:32

The government has introduced new incentives to encourage more lenders to provide microcredit loans to labor-intensive small firms and laid-off workers starting new businesses.

In a joint statement, the People's Bank of China, the Ministry of Finance and the Ministry of Human Resources and Social Security, said microcredit lenders are allowed to raise the lending rate by up to 3 percentage points more than the benchmark rate for loans granted since January 1 to laid-off workers starting new businesses.

The measures are part of the central government's efforts to provide additional capital to encourage the growth of small- and medium-sized enterprises (SMEs) and create more jobs.

The government will shoulder the financial burden of interest charges levied on businesses with thin profit margins.

The new measures will also raise the maximum loan to laid-off workers from 20,000 yuan ($2,915) to 50,000 yuan and the maximum loan for qualified small firms from 1 million yuan to 2 million yuan.

"SMEs are major engines of job creation in China," said Zhou Dewen, director of the Wenzhou Council for the Development and Promotion of SMEs. "The introduction of new incentives for microcredit loans is good news for SMEs."

Economists and industry experts said domestic enterprises still rely too heavily on bank loans to finance their growth. This reliance has seriously hampered the growth of many SMEs because banks traditionally prefer to lend to large State-owned enterprises.