BEIJING, Dec 28 (Reuters): China has set up its first batch of private lending firms in the northern province of Shanxi to better serve the cash-starved countryside, the Economic Daily said today.
The new lending companies would be given more flexibility in pricing loans, with the ceiling set at four times the official benchmark interest rate, the paper said.
Farmers and rural enterprises have long been forced to borrow from underground lenders at higher interest rates, because of the difficulty of tapping official channels such as the poorly performing rural credit cooperatives.
The state-owned Agricultural Bank of China [ABC.UL] and other commercial banks have long withdrawn credit services from many rural areas to focus on more lucrative cities.
Officials have cited a central bank survey as saying that the size of the informal lending market was about 950 billion yuan ($118 billion), or 7 per cent of gross domestic product and 6 per cent of all lending in China.