Provisional Rules on Microfinance Companies Reforming and Establishing Village or Township Banks

China

(enacted in 2009)

The rules are strict for Microfinance Companies to become legalized through reforming into Village or Township Banks. This transformation allows Microfinance Companies to take deposits.  In accordance with the Chapter II, III, IV of Provisional Rules Governing Village or Township Banks, Microfinance Companies are required to have permission from more than 2/3 shareholders, good records of management, initiated by banking institutions, recommendation from the financial office of provincial government. After liquidation of the microfinance company, application of formation of a new Village or Township Bank should be submitted to banking regulators.

The below rules provide guidance of how microfinance companies transform to Village or Township Banks. According to Law of Banking Regulation and Supervision, only banking institutions can legally take deposits from the general public, microfinance companies can take deposits only by reforming into banks. Establishment of banks were very strictly regulated and limited by regulatory authorities previously. The below rules ease relevant restrictions on the establishment of Village Banks. By legalizing the microfinance companies in this method, private capital has more effective ways to evolve into the banking system and open to more demand from rural areas.

The provisions are in several chapters:

Chapter I General Provisions

Chapter II Qualifications

Chapter III Requirements and Procedures

Chapter IV Regulations

Chapter V Supplementary Provisions