A Small-sum Lender's Success and Worries
Adjust font size:
The investors of an SSLC put their cash into the endeavor. The meager prospects of payback made the move like a benevolent act. Indeed, Wang Zhentao, chairman of Aokang Group -- a big shoe maker-- and leading investor in the Yongjia Ruifeng SSLC, was quoted assaying "We would have donated the money. What's the problem of using it to provide small lending to the needed?"
It might be true that some investors did not expect any economic returns. "But the situation will not be sustainable, if it remains unchanged, "Liu said, "and despite the fact that the SSLC is popular and successful, there will be few followers."
With the test run of small-sum lenders, the government was said to have aimed at two birds. Besides aiding financing for small enterprises, SSLC was expected to attract private money flowing in the covert, underground market into open and regulated operations. It was estimated that Wenzhou had 300 billion yuan of floating capital, 60 billion of which is believed to be in private lending, a lucrative business, especially at times of economic difficulty.
The eight SSLCs pooled a total of 1.3 billion yuan in registered company capital. It was clearly not up to the second task. Considering the difference in profits made by an SSLC and an underground operator, probably up to tenfold, the chances of achieving the second goal with SSLCs in the present conditions was slim.
If the seed money of an SSLC was regarded as a slice of the available fund drawn from the underground market, there was a reason to let it have a considerable economic return, Liu said. And because the SSLC gave powerful, effective support to small enterprises and rural households, which fulfilled the government policy's call, it should be eligible for state favorable treatment, just as state-owned banks were.
CHINT SSLC had already generated a small profit from the loans. It plowed it back for re-lending, because the regulations said an SSLC should not draw dividend in the first three years of operation. The money was handed out soon, driving the company's total lending to 232.25 million yuan.
For the time being, both the clerks and clients of CHINT SSLC were waiting for the Agricultural Bank's money to come.
(Xinhua News Agency March 20, 2009)