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IFC Secured Transactions Advisory Project in China
In 2004, under the China Secured Transactions Project, IFC worked with the government and the People’s Bank of China (PBOC) to develop and roll-out a secured transactions system to enable and promote the use of movable assets as collateral. The project helped the Chinese government draft and pass regulation which paved the way for banks to increase their lending to Small and Medium Enterprises (SMEs).
With IFC’s support, the PBOC created a single, centralized accounts receivables registry and carried out a nationwide campaign to raise awareness about movables financing. The overall aim of the project was to increase the amount of financing that local banks made to SMEs.
This report summarizes the background, development impact, lessons learned and remaining challenges of the China Secured Transactions Project. It also focuses on the results of an evaluation, that was conducted by an independent consultant and managed by the Development Impact Department, in partnership with the Access to Finance Business Line and the EAP region. The evaluation shows that as of June 2011, businesses had received more than $3 trillion in credit through more than 385,000 loans. Many of the beneficiaries were small businesses.
Some of the development results that the summary report highlights are:
Banks in China significantly increased the size of their SME lending portfolio. About 20 percent of the increased financing went to businesses owned by women.
The value of commercial loans secured exclusively by movable assets grew by 82 percent per year in 2008-2010, compared to 19 percent in 2006 and 2008.