Shanghai will expand the small-credit companies trial scheme from 10 suburban districts to citywide to give a big financial boost to small businesses, the city government said on Friday.

An industry association will also be formed to beef up the small-credit companies, whose trial scheme started in Shanghai only this month. The city has approved 17 small-credit companies in Baoshan, Songjiang, Jiading, Qingpu, Nanhui, Minhang, Fengxian and Jinshan districts as well as Pudong New Area and Chongming County. Three such companies started operations on November 15.

As the financial needs from small businesses are not limited to suburban districts or counties, the city decided to expand the trial to all its 18 districts and one county. Up to three small-credit companies can be set up in each district or Chongming County.

Shanghai's Deputy Mayor Tu Guangshao said small entities have their significance. "Small businesses are facing an economic slowdown and the setup of small-credit companies (to cater to them) is part of the solution to help them weather the downturn," Tu said.

Small-credit companies can't absorb public deposits and are encouraged to offer loans to rural families and mini-sized enterprises in the area they are located.

Small-credit companies are welcome to join the nationwide credit database under the People's Bank of China, the central bank. Most of the shareholders of small-credit companies are private entities with a strong capital base.

There are more than 300,000 small business firms in Shanghai, and the majority of them find it difficult to get loans from banks, Li Nianzheng, director of Shanghai Small-Sized Enterprises (Trade Development) Service Center, said earlier.

Li Yueru, general manager of Baoshan Baolian Small Credit Co, the first small-credit company in Shanghai, has received more than 400 inquiries, half of which are from enterprises outside Baoshan District.

(Shanghai Daily November 30, 2008)