Microloan Borrowers

Financial Institutions

Financial Institutions in China

There are five main types of financial institutions in China: wholly state-owned banks, the postal savings bank, non-fully state-owned commercial banks, foreign banks, and credit co-operatives. In addition, there are non-bank financial institutions, which include credit companies and lending companies.

Financial Institutions in China

Five Main Types of Financial Institutions

I. Wholly state-owned banks include state-owned commercial banks and policy banks, some of which have become publically listed.
     a. State-owned commercial banks: There are four state-owned commercial banks, commonly referred to as the "big four":

  1. Agricultural Bank of China (ABC) was established in 1979, headquartered in Beijing. The ABC has service outlets and an electronic banking network reaching every county seat in China. The ABC has a special credit unit dedicated to giving micro-entreprise credit in pilot regions. This bank is under a lot of pressure to start providing more services to farmers at the sub-county level.
  2. Bank of China (BOC), is mainly engaged in commercial banking, including corporate and retail banking, treasury business and financial institutions banking. It is the main bank permitted to accept foreign currency transactions.
  3. China Construction Bank (CCB), specializes in medium to long-term credit for long term specialized projects, such as infrastructure projects and urban housing development. This bank is increasingly becoming interested in expanding its clientele to smaller companies and individuals.
  4. Industrial & Commercial Bank of China (ICBC), has a special credit unit dedicated to giving micro-entreprise credit in pilot regions.

     b. Policy banks: The government established three policy banks in 1994 which currently play a key role in the support of the rural sector. They are:

  1. Agricultural Development Bank of China is mandated by the CBRC as the key to providing policy-related financial services for agriculture, rural areas, and farmers (collectively referred to as the SanNong.)
  2. China Development Bank, previously a state bank with responsibility for financing infrastructure development in China, is now charged with many other kinds of social and commercial tasks, among which it has been asked by the China Banking Regulatory Commissionto explore new ways to deliver financial services to the SanNong. CDB via its nationwide branches has taken positions in several of the new village banks.
  3. Export-Import Bank of China is responsible for supporting agricultural businesses to “go global” under the guidance of the CBRC.


II. The China Postal Savings Bank (CPSB) was inaugurated on March 20, 2007, becoming the country’s fifth largest bank. This marked a huge step in China’s financial reform, as well as opportunities for the development of rural finance, as approximately 60% of the bank’s potential clients are located in rural areas. While officially, loan product design is supposed to be driven from ongoing work at pilot branches in the provinces, in fact, recent reports point to the start a lot of activity at the county level in places as various as Jiangxi and Hunan provinces.

III. Non-fully state-owned commercial banks are divided into 2 sub-groups:
     a. Shareholding or joint-stock commercial banks are incorporated as joint-stock limited companies under the People's Republic of China's Company Law. Most of them have state-owned concentrated shareholders.
     b. City commercial banks have evolved from urban credit co-operatives (see section on Microfinance Service Providers). Due to their history, mandate and capital strength, the scope of city commercial banks’ business tends to be concentrated in the city where they are located. There is a widely varying degree of interest in participating in the small loans market, with city commercial bank entities in Taizhou, Baotou and Harbin being currently acknowledged as the most ambitious in this area.

IV. Foreign Banks:  After China’s banking sector opened completely on December 11, 2006, the number of foreign banks and the scope of their operations has greatly expanded. As of the end of December 2006, there were a total of 274 foreign banks operating in China, including 14 locally incorporated foreign-funded banks, 74 with branches in China, and 186 with representative offices.

V.   Credit co-operatives: see MicroCredit Service Providers.

Assets and Liabilities of Financial Institutions in China

(a)Rural financial institutions include rural cooperative banks, rural commercial banks, and rural credit cooperatives.
Source: CBRC Annual Report

Non-bank financial institutions
Non-bank financial institutions represent approximately 1.8% of China’s total assets, a decrease of about 50% in the last five years.  They include, but are not limited to the following:

I.  Credit guarantee companies: There remain more than 4,000 credit guarantee companies in China, some of which informally provide direct micro and small business lending.

II. Lending companies: There are approximately 2,400 lending companies with a combined business volume of RMB 100 billion per year, a significant portion of which is directed towards microentrepreneurs . The government recently acknowledged the legal status of these companies by issuing regulations which mandate them to direct their services to developing the rural economy.