Micro-credit companies may soon become an option for Taiwan’s financial institutions interested in tapping into the Chinese market, with regulators set to begin drafting rules for the lending firms, according to local banks.
The alternative may prove attractive to Taiwanese banks frustrated by the pace at which China is opening its financial services market to overseas companies, including those from Taiwan.
Four banks have already expressed an interest in setting up micro-credit companies in China since the middle of this month, when the Financial Supervisory Commission (FSC) announced plans to ease regulations on such operations.
The four banks are Taishin Financial Holding Co (台新金控), Chinatrust Financial Holding Co (中信金控), SinoPac Holdings Co (永豐金控) and Cosmos Bank (萬泰銀行), the commission said earlier this month.
China decided to speed up the development of the micro-credit niche following the tightening of credit experienced by small-sized enterprises late last year.
Micro-credit companies provide loans of less than 50,000 Chinese yuan (US$7,835) with maturities of no longer than two years, according to China Banking Regulatory Commission regulations.
As of the end of March, there were 4,878 micro-credit companies in China that had lent out 444.72 billion yuan, data from the People’s Bank of China showed.
The industry is eyeing the potential of the micro-credit niche because of the extended time Taiwanese banks must wait before being allowed to conduct Chinese yuan business in China.
The Chinese branches of six Taiwanese banks, for example, are now qualified to conduct yuan business with Taiwanese-invested companies by recording a profit for a full fiscal year, but only two of them have been actually licensed to do so.
These and other restrictions have pushed Taiwanese banks to seek other channels through which they can gain a foothold in the Chinese market.
The FSC’s new plan to allow Taiwanese banks to set up micro-credit companies in China is also likely to create a new trend of investing in the service, according to some local banks, which said the micro-credit business is still at an early stage of development.
Another option embraced by Taiwanese financial services companies to move into China is the leasing business.
According to commission statistics, 12 Taiwanese financial holding companies and banks have been approved to set up leasing companies in China, with First Financial Holding Co (第一金控) and Taishin Financial having set up two such companies each.