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PICC eyes insurance for micro-credit companies

By Hu Yuanyuan (chinadaily.com.cn)
Updated: 2008-12-16 17:38

PICC, the country's largest non-life insurer, is working on products to cover risks rising from micro-credit companies, sources say.

Micro-credit loans, usually featuring small amount, high frequency, short term and urgent needs, also lead to higher operating risks for micro-credit companies. Therefore, a number of insurance companies are turning their eyes to this market.

Experts said major risks for micro-credit companies include customer risk, internal risk and business environmental risk, among which customer risk is the biggest one.

Since the credit record of small and medium- sized enterprises (SMEs) is hard to track, micro-credit companies face larger risks in giving out loans. Any big changes in financing environment, top management and product marketing will result in bad loans.

Micro-credit is nothing new in China. In 2005, the People's Bank of China, the central bank, initiated a pilot scheme to develop micro-credit firms in different provinces, with the original intention of financing agricultural production and supporting the livelihoods of the rural poor rather than the manufacturing industry.

In recent months, micro-credit loans have been directed toward small businesses that have taken a hit under the tightening monetary policy adopted to battle inflation.