“Rolling Over Loans” Benefits Small and Micro Enterprises, but Implementation Requires Precise Guidance
Wu Xue'an
The National Financial Supervision Administration recently issued a notice (hereinafter referred to as the "Notice") to support banks and other financial institutions in enriching their loan products, optimizing lending services, and clearly defining the scope of rolling over loans for all small and micro enterprises. These enterprises can apply for rolling over loans if they have genuine financing needs and are experiencing temporary liquidity difficulties.
Funding circulation has always been a major issue for small and micro enterprises, which often struggle with insufficient funding, short-term cash flow problems, and high interest rates. The average lifespan of a small and micro enterprise in China is around 3 years, and many of them do not have access to credit until they are established for at least 4 years. In recent years, the financial institutions in China have offered loans to small and micro enterprises with an average interest rate of around 6%. However, this can be a significant burden for these enterprises.
In light of these challenges, the government has implemented policies to support small and micro enterprises. For example, in 2014, the original China Banking Regulatory Commission issued a notice to improve and innovate loan services for small and micro enterprises. This policy aims to provide more support to these enterprises by allowing them to apply for rolling over loans without collateral or interest rates.
In today's economic environment, it is essential to implement this policy effectively and ensure that small and micro enterprises can access credit at a reasonable cost. On the one hand, we need to further refine the policy to make it more operational and guide financial institutions to actively offer rolling over loans. On the other hand, we need to develop targeted loan products for different regions and industries, which will help meet the diverse needs of small and micro enterprises.
As a transitional credit behavior, bridge loans are often used by small and micro enterprises to solve short-term liquidity shortages. This highlights the financing difficulties faced by these enterprises. The "rolling over loan" policy is an attempt to address this issue in the current environment of rising non-performing loans and difficulty for small and micro enterprises to access credit.
Good policies require careful implementation measures and a strong execution force. We hope that the benefits of this policy will be fully enjoyed by all small and micro enterprises, leading to a positive feedback loop that drives further economic growth and stability.
This column article represents only the author's personal views.