It's a hot summer day in Beijing, but Zhang Bo's enthusiasm is stronger than the heat outside.

As president of a warranty company, Zhang has been thinking about the company's transformation for a long time and now has a solution in sight - microcredit.

Huo Xuewen, deputy director of the Beijing municipal commission of development and reform said in a press meeting that the capital is working on management regulations on microcredit companies and will launch several such companies on a pilot basis before the year-end. Meanwhile, Beijing will also promote village banks.

The first batch of such lenders, mainly in Zhejiang, will start giving out small loans from Sep 10 after receiving the go-ahead. Other provinces such as Guangdong, Jiangsu, Anhui and Inner Mongolia, are also preparing for the launch of microcredit lenders.

Though Beijing has not worked out the rules for microcredit lenders yet, Zhang Bo has carefully studied Zhejiang's pilot regulation.

In Zhejiang's version, microcredit lenders will be chosen from quality private enterprise whose net assets should not be lower than 50 million yuan, asset-liability ratio less than 70 percent and those that have been making profits for three years in a row, with revenue higher than 15 million yuan.

The threshold for the registered capital, however, could be lowered to 20 million yuan in less developed counties. But all registered capital should be in the form of money instead of goods, intellectual property or land usage rights.

Microcredit companies will be subject to their own sets of regulations. For example, 70 percent of the capital shall be given to lenders with outstanding loans less than 500,000 yuan. The lending rate is limited to less than four times the benchmark lending rate.

"Microcredit companies are not financial institutions yet. Those who would like to initiate microcredit firms are mainly targeting licenses for village banks," said Du Xiaoshan, a researcher with the rural development institute under the Chinese Academy of Social Sciences.

"But according to existing regulations, the largest shareholder or the only shareholder must be a bank. So if those microcredit companies would like to transform themselves into village banks, they should bring in a bank," he added.

According to Du, microcredit companies mainly serve self-employed people but can hardly reduce the scale of private lending in a big way. But microcredit could partly ease enterprises' mounting capital pressure.

(China Daily August 1, 2008)