CHONGQING – As China’s small businesses grapple with the impact of the COVID-19 pandemic, inclusive finance is firing on all cylinders to provide a cushion for cash-strapped businesses to help them weather the tough times.
Chen Ping, who owns a wonton restaurant in Chongqing, worried that his business could no longer survive and his restaurant would be closed if he couldn’t weather the COVID-19 storm.
“Before the pandemic, cash flow averaged 3,000 yuan ($454) per day, but now we have seen a decrease of more than 1,000 yuan on average every day,” said Chen, who is also beset by rising costs for labor and auxiliary materials.
Chen ran from pillar to post in search of funding, but his company is too small to secure a sufficient loan amount. Amid the dark days, he saw some glimmers of hope when one day he came across a credit product that doesn’t require collateral.
At his wit’s end, Chen decided to give it a try. He submitted his personal information via cell phone, and because his credit report was good, he got a 100,000 yuan line of credit that could be used within minutes. “It was timely help,” Chen said.
In light of the uncertainties and challenges posed by the complex global situation and the sporadic resurgence of COVID-19 on the domestic front, China intends to help market entities, especially smaller ones, by rolling out supportive policies.
Inclusive finance is growing vigorously across the country, especially in light of the pandemic. Official data showed that the balance of inclusive small and micro business loans was 19.1 trillion yuan at the end of 2021, with a faster growth rate than other loans.
Year-on-year growth rates of inclusive loans offered to small and micro businesses by China’s big five state-owned commercial banks all remained above 30 percent last year.
Inclusive finance aims to meet the financial needs of all social strata and groups with a focus on small businesses, low-income people and those in rural areas in China.
Chongqing Fumin Bank, which helped Chen overcome his obstacles, is a pioneer in the industry and has extended its range of services to small and micro businesses such as restaurants, convenience stores and laundromats.
Through this innovative financial model, financial institutions can deliver large-scale, inexpensive and efficient services through digital technologies, including big data and artificial intelligence.
“Financial products are integrated into procurement and payment platforms commonly used by small and micro businesses,” said Yan Dong, executive vice president of Chongqing Fumin Bank.
By leveraging big data technologies, the bank could build accurate customer profiles and provide loans based on their personal credit, tax payment and procurement data, Yan said.
The smart auditing system, which also leverages digital technologies, sets more than 100 prerequisites such as overdue identification and registrations, automatically checks whether an applicant meets loan conditions and assesses the business status of customers to prevent and reduce risks as much as possible. .
Similar to Chen’s wonton business, a pastry shop run by Ye Cai in Guangzhou, Guangdong province, has also been hit by the pandemic.
Thanks to inclusive finance, Ye now has the habit of applying for loans on a mobile phone to solve the problem of capital turnover. “When the business is really bad or I need to replace large equipment, I apply for a small volume of loans for quick help at my fingertips,” Ye said.
While small and micro enterprises in China are experiencing an improving financing environment, structural issues still hamper them, including difficulties in applying for unsecured loans and medium- and long-term loans.
The country will continue to promote the quality development of inclusive finance. In this year’s government work report, China proposed further improving monetary policy transmission mechanisms, channeling more funds to key areas and weak links in the economy, and expanding coverage of inclusive finance.
In February, the meeting of the Central Committee for Deepening Comprehensive Reform discussed and adopted guidelines on promoting high-quality development of inclusive finance and setting clear directions and objectives for the next phase.