Guideline on Microfinance Companies Pilot

China

(enacted in 2008)

To regulate Microfinance Companies, China Banking Regulatory Commission and People’s Bank of China issued the guideline, giving guidance on establishment and regulation of Microfinance Companies. This guideline is to stimulate and encourage Microfinance Companies to give financial loans to farmers. Microfinance Companies are legal entities, who are illegal to take deposits. Based on serving households, agriculture and economic development in rural area, Microfinance Companies are encouraged to issue loans to rural household and small enterprises. The interest rate should not exceed the legal limit and not lower than 0.9 of benchmark interest rate, set by People’s Bank of China. The regulation authority is the financial office of provincial government. PBC is responsible of monitoring the interest rate and tracking the capital of companies.

The guideline has several parts including: nature, establishment, capital resources, use of capital, regulation, dissolution, bankruptcy and transformation into village banks of microfinance companies.