The CBRC Issued Notice to Improve Financial Services and Reduce Financing Cost for Micro and Small Enterprises


In response to the requirement of the executive meeting of the State Council to reduce financing cost for MSEs with multiple measures, the CBRC issued the Notice on Improving and Innovating MSE Loan Services and Enhancing Financial Services for MSEs (hereinafter referred to as the Notice).


At present, working capital loans are the major financing tools for MSEs. But in banks’ capital loans businesses, there are problems such as unreasonable maturity, undiversified product variety and inflexible service model. These problems affect the normal operation of MSEs. Sometimes enterprises resort to high interest rate financing methods to solve the problem of capital turnover, thus raising the financing cost of MSEs and affecting their normal operations. This will also make it difficult for banks to know the borrower’s financial and operational status and the quality of the loans, thereby increasing credit risks for MSEs. The CBRC attaches great importance to this problem. After analyzing the cause of the problem, summarizing the best practice and consulting experts, the CBRC issued the Notice.


The Notice, focusing on improving the management of MSE loans, encourages banking institutions to improve and innovate MSE loan services and raise service efficiency. Firstly, the Notice requires the banks to set reasonable maturity for working capital loans based on the operational characteristics, scale, operating cycle and risks of the enterprises so that the maturity will better match the operating cycle of the enterprises. Secondly, the Notice encourages banks to diversity the loan products by using revolving credits, annually-reviewed loans and other types of loans in a scientific way. The Notice also encourages banks to use installment and other flexible repayment methods to provide convenience for borrowers and reduce lump sum payment pressure for MSEs. Lastly, the Notice urges banks to innovate their service models. Banks can renew loans for eligible MSEs with repayment difficulties as well as further financing needs when their working capital loans mature. However, banks should carry out investigation and evaluation in advance and categorize risks in a scientific way whereby loans meet the Pass standards should be classified as Pass.


Following the principle of reducing financing costs and improving risk management of loans, the Notice not only encourages banks to enhance working capital loan services for MSEs, but also requires banking institutions to strengthen risk management when conducting innovative businesses such as renewed loans, annually-reviewed loans, and revolving loans, banks should establish relevant risk management system, set operational processes, clearly define customer licensing and transaction authorization standards, reasonably design and improve supporting documents like contracts, and improve IT system.


In terms of loan renewal, the Notice prescribes that banking institutions should manage the whole process of loans businesses. Banks should collect the information of MSEs through various channels to ensure that the enterprises meet the criteria of loan extension. Banks must improve the internal control of loan renewal and separately identify renewed loans in the credit system. The Notice requires banks to enhance post-loan-granting management, carry out follow-up on-site investigations into the borrowers and closely follow the operation, financial status and loan use of the borrowers. Banks should more frequently examine and evaluate the risk categories of renewed loans to prevent manipulation over the risk categories.


MSEs are important part of the economy. They play a positive role in creating jobs, stimulating innovation, energizing the market and boosting economic development. The Notice aims to supervise and guide banks in offering working capital loans to MSEs. It will be conducive to increasing access to loans and easing financial burdens for MSEs. It will facilitate the sound development of private financing and enable banking institutions to correctly judge the quality of loans to avoid moral risks caused by staff participation in handling high-interest rate loans, so as to provide better financial services to MSEs.


The issuance of the Notice is an important action in line with the requirement of targeted macro-control raised by the State Council, strengthening financial support for real economy and bank support for MSEs. The CBRC will continue to regulate and guide banking sector to increase financial support for MSEs. By improving financial services, optimizing product design, upgrading business process, innovating service models and enhancing risk management mechanism, the banking sector will better serve the sustainable development of MSEs and accelerate economic restructuring and transformation.



Copyright: China Banking Regulatory Commission
ADDR:Jia N0.15 Financial Street, Xicheng District, Beijing, 100033