"Two billion yuan of capital was all lent out within the first one or two months of the year, and then I had nothing to do because there were no subsequent funds," said the general manager of a micro-loan company in Shenzhen on March 7. As an ancient form of private finance, private lending has a history of more than a thousand years. "If the pipes are blocked, even if there's plenty of water in the pool, it can't flow to the end." He believed that micro-loan companies were like the capillaries of private finance, and the inability to fully allocate resources according to market rules was the fundamental reason for the micro-loan companies' "thirst". During the Two Sessions, easing restrictions on micro-loan companies became one of the hot topics. Guo Guangchang, a national people's representative and chairman of Fosun Group, recently submitted a proposal to promote the development of micro-loan companies. He suggested relaxing financing restrictions for high-grade micro-loan companies, allowing them to borrow up to three times their net capital, and gradually allowing further broadening of their financing channels through asset transfers and interbank lending. At the "Two Sessions" in 2010 and 2011, the All-China Federation of Industry and Commerce (ACFIC) proposed "further promoting the development of micro-loan companies" as one of its main proposals. "We have always recommended giving micro-loan companies certain policy support, including encouragement in multiple aspects such as financing channels and tax preferences, to promote their greater role," said a person from the ACFIC. The thirst for funds In recent years, lifting the upper limit of capital, broadening financing channels, and increasing the proportion of bank financing have been the constant calls of micro-loan companies. Meanwhile, the funding needs of small and medium-sized enterprises are very strong, resulting in prominent supply and demand contradictions. According to statistics from the People's Bank of China, by the end of 2011, there were 4,282 micro-loan companies nationwide with a total loan balance of 391.5 billion yuan. "Some micro-loan companies run out of lendable funds soon after establishment, and new customers can only wait in line," said the chairman of a guarantee company. The "only lending, not depositing" business model, which relies solely on shareholder funds, greatly restricts the continuous development of micro-loan companies. In 2008, the CBRC and the PBOC jointly issued the "Guidance on Pilot Programs for Micro-loan Companies," stipulating that the main sources of funding for micro-loan companies should be shareholders' capital contributions, donated funds, and borrowed funds from no more than two banking institutions. It also restricted the amount of borrowing from banks to no more than 50% of the company's net capital. A staff member of a local government financial office stated that the primary source of funds for micro-loan companies is shareholders' capital contributions, with very little coming from banks, and donations are negligible. "Less than one-third of the companies can secure sufficient funds from banks, and even if they maximize their borrowing from banks up to 50%, micro-loan companies still lack sufficient lendable funds," said an insider. "It's not easy to borrow from banks; the number of available banks is too limited, and both costs and thresholds are high." "It's hard to borrow from banks during credit tightening, and currently, there are only two ways to expand scale: increase capital through share issuance or raise funds through IPOs," said the chairman of a micro-loan company. "Most micro-loan companies are far from being able to raise funds through IPOs. To my knowledge, since last year, half of the micro-loan companies in Guangdong Province have increased their capital through share issuance, otherwise, they would have no money to lend." Limited by the regulation that micro-loan companies cannot borrow more than 50% of their capital from banks, increasing capital through share issuance has become one of the main solutions. The China Association of Microfinance released the "2010 China Microfinance Blue Paper," disclosing that in 2010, the total funding sources for micro-loan companies nationwide amounted to about 190 billion yuan, of which only about 17 billion yuan came from commercial banks, less than one-tenth. Unbinding micro-loan companies Zhejiang, where private capital is particularly active, took the lead in "unbinding" micro-loan companies. In February 2011, the Zhejiang Provincial Administration for Industry and Commerce issued the "Interim Measures for Financing Supervision of Micro-loan Companies in Zhejiang Province," stipulating that Zhejiang micro-loan companies could not only borrow from banks but also borrow from legal shareholders, adjust and borrow funds between micro-loan companies within the city, cooperate with banking institutions and local financial asset trading platforms to conduct asset transfer business through repurchase agreements, and other approved financing methods. This method doubled the upper limit of the financing ratio for micro-loan companies. For example, a micro-loan company with a net capital of 2 billion yuan could previously borrow up to 1 billion yuan from banks. Now, it can increase its borrowing by 1 billion yuan through targeted borrowing from shareholders, bank financing, or interbank lending, i.e., it can borrow up to 2 billion yuan. At the same time, to prevent high-interest private capital from entering the market through micro-loan companies, Zhejiang allowed micro-loan companies to borrow from shareholders but made agreements regarding the eligible borrowers and the amount of borrowing. Additionally, regulations were made to monitor the flow of funds from micro-loan companies to promote transparent and open operations. However, a responsible person from a micro-loan company pointed out that the actual effect of "targeted borrowing from legal shareholders" was not significant. Because the shareholders of micro-loan companies are relatively dispersed, often with many people but limited individual funds, the amount of borrowable funds is quite limited. Moreover, the difficulty in financing is a common issue in the industry, with limited funds among peers, leaving little room for mutual borrowing. For micro-loan companies that "only lend and do not take deposits," the possibility of accepting deposits is almost non-existent. Ma Cong, the general manager of Guangzhou Haiyin Micro-loan Company, said that the regulatory authorities might consider providing micro-loan companies with other means to supplement their funds in the future, such as allowing micro-loan companies to enter the interbank lending market or issuing short-term and medium-term notes to solve funding problems. However, under the current policy system, micro-loan companies have not yet been included in the supervision scope of financial institutions. What micro-loan companies truly need is for the CBRC and the People's Bank of China to stipulate borrowing from multiple financial institutions and increase the borrowing ratio. To promote the development of micro-loan companies, Guangdong Province also issued a series of unbinding documents this year. "This year, we raised the upper limit of capital for micro-loan companies in Guangdong from 2 billion yuan to 5 billion yuan and increased the borrowing ratio. For those operating continuously for over a year, after negotiating with the financial institutions providing the funds, they can increase their borrowing quota to 100% of their net capital," introduced Ye Suisheng, deputy director of the Guangdong Financial Office, on March 7. This article originates from Xunrong Network http://www.xunrong.com. Please indicate the source when reprinting. Financing!