The People’s Bank of China (PBC) recently issued the Notice on Fully Carrying out the Capacity Enhancement Project to Strengthen the Provision of Financial Services for Micro, Small and Medium Enterprises (hereinafter referred to as the Notice), which is aimed at further improving the capabilities of banking financial institutions to provide financial services for micro, small and medium enterprises (MSMEs), including self-employed traders, strengthening the building of a long-term mechanism whereby banking financial institutions will have the confidence, willingness, ability and professionality to make loans, and pushing for the provision of better financial services for the real economy in the new stage of development.
The Notice sets specific requirements in the following aspects for enhancing the capabilities of banking financial institutions to provide financial services for MSMEs. First, strong action should be taken not only to increase MSME financing and expand its coverage, but also to improve its quality and enhance its efficiency. Second, work should be done to continuously optimize banks’ internal policy arrangements. Third, banking financial institutions should make full use of sci-tech approaches. Fourth, concrete measures should be taken to improve the loan pricing capabilities. Fifth, financing services and supporting mechanisms should also be improved.
The Notice requires banking financial institutions to step up credit supply to MSMEs, optimize the credit product services for self-employed traders, and expand the coverage of inclusive financial services. They should increase their investment in inclusive fintech services and develop innovative credit products. Furthermore, they should bring out and continuously improve loan products, such as loan renewals without repayment of principal and the pay-as-you-go loan scheme, facilitate the use of funds, and reduce the overall financial costs for MSME financing. They are also encouraged to provide financing support for MSMEs upstream and downstream along the supply chain via the receivables-backed financing service platform launched by the PBC’s Credit Reference Center.
The Notice stresses that all banking financial institutions should embed the loan prime rate (LPR) in internal pricing and price transmission, enhance differentiated and thoughtfully designed pricing of loans, and strengthen their capabilities of controlling liability costs. All PBC branches should establish a sound mechanism for government-bank-enterprise collaboration, and accelerate steps to promote the sharing of MSME credit information. Additionally, they should conduct assessments on the orientation efficacy of credit policies for micro and small businesses, further optimize the system for the assessment of financing environment, and make continued efforts to improve local financing environment.
