PRC micro-loan industry shows varying fortunes – China Finance

According to incomplete statistics, there were more than 4,000 micro-loan companies nationwide at the end of 2011. With the explosive growth of micro-loan companies, the PRC’s micro-loan market has attracted an increasing number of foreign investors. Foreign companies such as Temasek, International Finance Corporation and Microcred Group have invested in and established micro-loan companies in the PRC. So, what are the particular features of the micro-loan industry? And what is the current state of play with foreign-invested micro-loan companies?

Local features

If a PRC local government permits the entry of foreign investment into the micro-loan market, a foreign investor needs to familiarise itself with the particular features of the PRC’s micro-loan industry to avoid unnecessary legal risks. Micro-loan companies in the PRC are subject to oversight of the finance offices at every level. The particular features of the micro-loan company industry are mainly manifest in such facets as establishment, sources of funds, application of funds and oversight.

Establishment of companies: the preparations for establishment, formal opening for business, site selection, qualifications of the shareholders, registered capital and management personnel for a micro-loan company are required to satisfy the policy requirements formulated by the competent local finance office or authority.

Kenneth Kong is a partner and Cindy Guo is an associate at Martin Hu & Partners (MHP Law Firm)