Micro-credit lenders jump in number

The number of micro-credit companies in China saw a dramatic rise in the first three quarters this year, with their new loans rising only slightly year-on-year, a sign of both economic slowdown and poor management of the finance firms.

The number of micro-credit companies reached 5,629 by the end of September, up 48 percent year-on-year, the People's Bank of China said in a report on its website Wednesday.

The lenders issued a combined 141.4 billion yuan ($22.6 billion) in new loans in the first three quarters, up 2.5 percent year-on-year, according to the central bank.

"The new loans grew more slowly than in the first three quarters this year partly because of less demand from small and medium-sized enterprises (SMEs) hit by the economic slowdown," Han Jianli, deputy general manager at micro-credit firm Beijing Guoxu Small Loan Co, told the Global Times Wednesday.

"Some SMEs turned to the commercial banks, who have more money available for lending as the central bank has loosened liquidities," Han noted.

The central bank has cut the reserve requirement ratio twice this year for commercial banks and financial institutions, a move analysts estimated will release liquidities totaling 820 billion yuan.

Han, who has worked in the sector for over 25 years, believes that the non-performing loans ratio of some micro-credit firms may reach as high as 30 percent, but they report a rate of only 5 percent to financial and banking regulators.

"If the non-performing loan ratio of micro-credit firms rose above the 10 percent mark, the financial risks will be huge," Du Xiaoshan, a pioneering micro-finance researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, told the Global Times.

Du said micro-credit firms need to focus on quality rather than quantity, especially when the economy is slowing down.

Han of Guoxu Small Loan said the inner operations of some micro-credit firms are still immature.

"Some major shareholders, who are liable on debts but have no management authority, tend to want to control the business operations of the finance firms, which hampers the ability of the managers to run the business," Du noted.

East China's Jiangsu Province was the top-ranking province in number of micro-credit companies, reaching 465 by the end of third quarter, according the central bank.