Speech by Ashok Lavasa, ADB Vice President for Private Sector Operations and Public–Private Partnerships, at the Signing Ceremony of Zhujiang Financial Leasing Company Project, 2 November 2021.
Ladies and Gentlemen,
Good afternoon and a warm welcome. I am pleased to join the ceremony and witness the signing of ADB’s $40 million loan agreement with Zhujiang Financial Leasing and the signing of the parallel loan from DEG.
The $40 million loan to ZFL will be ADB’s second financing package to the company dedicated to support improved access to finance for small and medium-sized enterprises. ADB is very pleased to be partnering with DEG to mobilize an additional $40 million for ZFL.
SMEs are an important part of the PRC economy. The development of SMEs directly contributes to economic growth, given their critical role in creating jobs. Small businesses with 300 or fewer employees accounted for 98% of all firms and contributed more than 60% of total GDP, 50% of tax income, and 75% of job creation. Despite the significant contribution of SMEs to economic growth, limited access to finance has always been a major constraint on SMEs. The outbreak of COVID-19 pandemic in 2020 has also adversely impacted SMEs in the PRC. They are vulnerable to shocks because of their financial weakness, lower degree of business diversification, smaller size, and lower ability to withstand temporary disruption in production and services.
The Government of the PRC has implemented various initiatives to improve the business environment for SMEs and facilitate their access to finance, including amending the Law on Promoting Small and Medium-sized Enterprises and promoting the development of small banks and non-bank financial institutions to broaden the financing channels for SMEs. Despite government initiatives, many SMEs are still marginalized in access to financing. Credit to SMEs accounted for less than 30% of total bank loans, and the financing gap for micro and SMEs in the PRC is estimated to be 17% of GDP.
ADB’s operational priorities closely align with the development agenda of its developing member countries. ADB’s country partnership strategy for PRC emphasizes expanding access to financing for private companies, particularly SMEs. ADB’s Financial Sector Operational Plan also outlines the strategy to support financial inclusion of the traditionally underserved segment. The current loan will support ZFL to play the important role in supplementing commercial banks and improving SMEs’ access to finance in the PRC.
Ladies and gentlemen, thank you again for attending this ceremony to witness the signing of these two loans with Zhujiang Financial Leasing. Congratulations to ZFL, DEG and our team at ADB.