First Small Loan Company Registered in Xinjiang

I came across an interesting press release about a set of Small Loan Companies (SLCs) that just got registered in Urumqi, Xinjiang this morning.

The Uyghur Autonomous Region Government issued a pilot test program guideline for SLCs in February 2009. A total of 11 firms applied to register and 5 were provided the license. The largest is Huachun Small Loan Company (华春小额贷款股份有限公司), the focus of the press release.

A few facts of particular interest from the press release that I noticed were:
1) Huachun has 100 million RMB of registered capital (~14.6 million USD)
2) 90% of the capital came from private investors and 10% came from an investment company
3) Investors include enterprises, individuals, and “society organizations” (I am not sure if this means NGOs? associations? the state poverty alleviation office?)
4) The loans are aimed at small-medium enterprises (SMEs) and can be on credit, on guarantee, or secruitized. Loan amounts are from 10K RMB to 5 million RMB (~$1.5K USD to $731.7mn USD)
5) New customers will need only 4 days for approval; repeat customers only need 4 hours!
6) 60% of the loans will be for rural areas as part of the “Three Agricultural” initiative
7) The people present at the signing ceremony (which tells us what’s needed to get an SLC approved):
a. Urumqi Economic Committee’s Party Secretary
b. Urumqi Economic Committee’s Party Chairman
c. Urumqi Small Loan Company Pilot Working Group’s Chairman
d. Urumqi State Administrative Industry and Commerce’s Bureau Chief

8) The PR directly referenced that Huachun, if successful, will transform into a village bank within 3 years
9) If successful, Huachun can apply to incorporate an affiliate in Yiwu County

Some Quick Analysis

It is interesting that the PR explicitly stated that Huachun is allowed to expand into another county if they are successful.  Current CBRC and PBoC regulations only allow Small Loan Companies (SLCs) to incorporate at the county levels (县), not at the provincial level.  It seems that the Xinjiang government government is thinking about experimenting on a higher level, which would make SLCs more profitable and sustainable in the long run.

The reference to become a village bank in 3 years is also noteworthy.  There is clearly an “end-game” for Huachun.  They want crack into the banking market and the SLC license is the way to do that.  Having a successful venture with proven credit and risk management records will give them leverage later on as they court a banking institution investor required for a village bank license.

The fact that Xinjiang only issued its pilot guidelines in February and in 5 months they have issued licenses indicate that the model is effective.  It reflects the national build up of these SLCs (now 500+ of them).

However, this is still not a “microfinance” company still.  From the surface Huachun is explicitly targeting SMEs and in fairly wealthy counties in Xinjiang, not poor individuals / micro-enterprises.

I wonder if by “social organizations” they mean NGOS or multilateral organizations.  The World Bank has a significant presence there.  However, it is most likely that it’s a state civil organization like the State Council’s Poverty Alleviation office, which has been active in promoting microfinance with CFPA.

Bookmark and Share

Leave a Reply