Microcredit companies may debut in Zhejiang Province in July on a pilot basis to meet the demand of small and medium-sized enterprises' growing demand for capital, sources said.

"To standardize and regulate private capital, each county in the province will have one to two microcredit companies," the source was quoted by Shanghai Securities News as saying.

The first batch of such lenders, after receiving the go-ahead, will start giving out small loans from September.

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.

Zhou Dewen, head of Wenzhou Small and Medium Enterprises Development Institution, said: "Setting up microcredit companies is the crux to solving the financing difficulties of small and medium-sized enterprises."

Microcredit companies will be subject to regulations. For example, they will have to ensure diversity of loan receivers.

According to Wu Jiaxi, head of Zhejiang small and medium enterprises bureau, small enterprises' financing difficulties have been caused by several factors, including soaring raw material prices. And, because of a tightening monetary policy, SMEs find bank loans much harder to get these days.

"My quota for issuing loans this year is only half of what I had last year," said an officer with Industrial and Commercial Banking of China, the country's largest lender.

Statistics from the Zhejiang banking regulatory bureau show that because of the credit crunch, most small and medium-sized enterprises have to resort to the private lending market.

Take Wenzhou enterprises' operating capital for instance. The proportion of their own capital, bank loans and private financing has changed from 60:24:16 in 2006 to the current 54:18:28.

(CRIENGLISH.com July 16, 2008)