Issues in the Development of MSMEs

Transcription

1 Issues in the Development of MSMEs Presented to Asia Microfinance Forum Shanghai, PRC July 24, 2014 SUN Tianqi People s Bank of China 1

2 Internal factors behind the financing problems facing MSMEs Inherent features of MSMEs Small size Ineffective management Products with little technology content,unstable performance Large fluctuations in earnings Unsound financial status Lack of credit ratings and credit records Weak awareness of building a credit Lack of collaterals Low resilience to risks Difficulties confronted banks in pre-lending investigation, on-lending examination and after-lending management. 2

3 Internal factors behind the financing problems facing MSMEs Small and micro enterprises lack aspirations of developing the industry Products with immature technology were rushed out to achieve quick success and get instant benefits. Enterprises can not afford in psychology and funds to sit out the loss in early period. Enterprises lack ambition to become a national or even world leader, with their market competitiveness volatile. Enterprises are not keen on their own business areas,but are easily lured by asset bubbles. In particular, some enterprises are more likely to stray from their main business when having more funds at hand than those needed in their operation. Some enterprises are technology enthusiast,and hold on to their patent overemphasizing on 100% ownership. They lack the experience on financial integration, management and marketing etc., thus are difficult to gain support. 3

4 Internal factors behind the financing problems facing MSMEs MSMEs owners are short of financial knowledge Having little initiative or time and effort to learn financial knowledge Most of them do not have the idea to reach out to financial institutions for funds until the government provides the platform. Some failed to make full use of basic financial products, not to mention pledge financing using patent, trademark and other intangible assets as collaterals. 4

5 Financial factors behind the financing problems facing MSMEs Financial services are greatly improved in supporting the development of MSMEs, with the ratio of loans to small and micro enterprises, loan coverage ratio, service coverage ratio and loan approval ratio enhanced. However, efforts still need to be made in the following aspects: Bank branches have limited rights to give more support to MSMEs. Some banks adopt one-size-fits-all standard in credit access,with few MSMEs meeting the standard. Currently, financing costs are driven up by several reasons, while the profits of small and micro enterprises remain low. The traditional redundant procedures of loan issuance can not be compatible with the short, frequent and quick financing needs of small and micro enterprises. Financial service system still needs to be improved with regard to insufficient competition among branches in local areas and few local banks such as community banks. 5

6 Financial factors behind the financing problems facing MSMEs As an important constituent of customers in financial institutions, intensified efforts should be made to protect the financial rights of small and micro enterprises. The financial consumer protection bureau of the People's Bank of China mainly handle the complaints from natural persons. Some small and micro enterprise legal persons have also complained to the People's Bank of China. Although there are not a great amount of such compliants, but the complaints are typlical and mainly focus on the following aspects: Enterprises can not withdraw cash from the bank when they need to pay migrant works by the end of the year. The money transfered by the end of the quarter can not arrive timely, thus affecting the signing of the contract. Different fee-charging were applied to differet transfer channels. Uninformed enterprises may suffer from delayed money transfer when choosing low cost channels. Banks refused to make payment upon the Banker s Acceptance Draft. Enterprises can not get loans from banks 6

7 Policy response Regulator level: The central bank should take steps to guide banks to strengthen their support to MSMEs via targeted RRR decrease, central bank lending, rediscount and credit policy etc. So far the central bank has loaned 50 billion RMB for commercial banks to make loan to MSMEs. The required reserve ratio of rural credit cooperatives is 6 percent lower than that of the big banks. Encouraging banks to support small and micro enterprises through regulating policies Adjusting the calculation of LDR Commercial banks have increased their tolerance towards the NPL ratio Leading the private capital into financial industry, help develop small financial institutions and promote the competition among financial institutions in local areas in an effort to build up a multi-layered, multi-dimensional financial service system. Banks need supporting policies on taxation and collaterals etc. Establishing the comprehensive information platform and credit system of MSMEs. 7

8 Policy response Regulator level: Organizing financiall institutions to carry out financial education campaigns towards MSMEs. The People s Bank of China and the China Banking Regulatory Commission have appointed September as the 'Fianncial Literacy Month' starting from In this campaign, educational activities are designed tailored to the needs and features of MSMEs owners to enhance their finanical knowledge and risk awareness. Better targeted and effective financial literacy campaign is needed. Building a smooth and open channel of financial consumer protection. The People s Bank of China finanical consumer consulting and complaints handling hotline has covered 17 provinces, accounting for 61.6% of the national area and 58.3% of the total population. It is expected that by the end of 2014 the coverage will expand nationwide. In addition, other regulators have their own conplaints handling channels as well. 8

9 Policy response Financial institution level Commercial banks should intensify their support to MSMEs. Providing better financial services via internet sucn as opening an account, settlement, wealth management etc. Innovating products and services according to the features of MSMEs, such as pledge on intellectual property, accounts receivable, personal property, stock equities, invoices,inventories, and insurance contracts etc. Taking effective actions to prevent risks so as to ensure sustainable financial status Apart from the insurance protection, insurance companies could also provide financing for small and micro companies through equity investment, funds, creditor's right, asset-backed plan etc. 9

10 Policy response Case A ICBC On-line Loan AKA internet revolving credit is the one-time loan contract designed for small and micro companies for revolving credit. In the valid period of the contract, a client could withdraw and pay back under the contract via on-line banking system Guaranteed-- withdrawal at any time during the contract period Flexible--the one-time contract covers the revolving credit business in one year Convenient-- on-line banking saves customers time and ernergy Efficient-- realtime withdrawals and repayments Economical-- only the used amount of credit would bear interests, and prepayment is allowed. High value-- the maximum credit is 30 million RMB 10

11 Policy response Case B Ali Petty Loan is a pure credit facility that Alibaba e-financing platform provides for its members. Any registered Ali member who has a membership of at least 6 months and active transactions record can apply for this non-collateral, nonguaranteed credit. The Ali Platform uses data of the clients' transaction credit and behaviors to build up a credit and risk rating system through Big Data analytics and Cloud Computing. The Platform replaces staff with data and turns to the website instead of traditional business outlet. The convenient, realtime online operation needs only 3 minutes to file an application and get the customer s credit in 1 second with no human intervention at all. By the end of 2013, 700,000 small and micro enterprises as well as start-ups have used this service accumulatively, with credit value amounting to 170 billion RMB and on an average of 35,000 yuan/per client; the length of maturity ranges from one day to one year, 137 days on average; the average renew-loan within one year is 4.7 times/per customer, and the NPL ratio under the Five-Tier Loan Classification is lower than1.5%. 11

12 Thank you! 12