Inclusive finance helps small enterprises weather epidemic-induced challenges

CHONGQING -- As small enterprises in China grapple with the impact of the epidemic, inclusive finance is running full steam to provide a cushion for the cash-strapped companies and help them tide over difficulties during the trying times.

Chen Ping, who owns a wonton restaurant in Southwest China's Chongqing, feared that his business could no longer sustain and that his restaurant would be shuttered if he could not weather the COVID-19 storm.

"Before the epidemic, cash flow on average would come in at 3,000 yuan ($471) 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 of labor and auxiliary materials.

Chen ran from pillar to post in search of funding, but his business is too small to be collateral for securing a sufficient loan amount. Amid the gloomy days, he saw some rays of hope when one day he came across a credit product that does not require collateral.

At his wits' end, Chen decided to give it a try. He submitted his personal information via mobile phone, and because his credit record was good, he got a credit line of 100,000 yuan that is recyclable in use within minutes. "It was a 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 assist market entities, particularly those with smaller scales, by rolling out favorable policies.

Inclusive finance is being vigorously developed across the nation, especially in light of the epidemic. Official data showed that the balance of inclusive loans to small and micro enterprises was 19.1 trillion yuan by the end of 2021, with a growth pace quicker than that of other loans.

The year-on-year growth rates of inclusive loans offered to small and micro businesses by China's state-owned five 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 smaller enterprises, people with low incomes and those in rural areas in China.

Chongqing Fumin Bank, which helped Chen ride out challenges, is a trailblazer in the sector and has extended its service scope to small and micro businesses such as restaurants, convenience stores and laundries.

Thanks to the innovative financial model, financial institutions are able to provide large-scale, low-cost and efficient services through digital technologies including online platforms, big data and artificial intelligence.

"Financial products are embedded in the procurement and payment platforms commonly used by small and micro enterprises," said Yan Dong, executive vice-president of Fumin Bank.

By leveraging big data technologies, the bank could draw precise customer profiles and provide loans based on their personal credit, tax payment and procurement data, Yan added.

The intelligent audit system, which also relies on digital technologies, sets more than 100 preconditions such as identification and overdue records, automatically checks whether an applicant meets the loan conditions, and evaluates the business status of customers to prevent risks to the greatest extent.

Similar to Chen's wonton business, a pastry shop run by Ye Cai in Guangzhou, capital of South China's Guangdong province, has also been affected by the epidemic.

Thanks to inclusive finance, Ye is now accustomed to applying for loans on the mobile phone to solve the problem of capital turnover. "When the business is really bad, or I need to replace big equipment, I would apply for a small volume of loans for timely help just on my fingertips," Ye said.

While small and micro enterprises in China are seeing an improving financing environment, there are still structural problems obstructing them including difficulties in applying for the initial loan, credit loan and medium-and long-term loans.

But it is evident that the country will continue to promote the high-quality development of inclusive finance. In this year's government work report, China has proposed to further improve the transmission mechanism of monetary policy, channel more funds into key areas and weak links, and expand the coverage of inclusive finance.

In February, the meeting of the central commission for deepening overall reform reviewed and adopted guidelines on advancing high-quality development of inclusive finance, setting clear directions and targets in the next steps.

"Promoting high-quality development of inclusive finance will help small and micro market entities better cope with complex situations and overcome challenges, as well as help ensure and improve living standards, and promote recovery and healthy development of the economy," said Dong Ximiao, chief researcher with Merchants Union Consumer Finance Company Limited.

After receiving financial support, Chen Ping and his wife were busy again. He is mainly responsible for purchasing raw materials, and his wife makes wontons in the kitchen. This is the main source of income for the family.

"Although the epidemic has impacted our business, I am confident that the difficult period will pass," Chen said.