Micro-loans Secured by Time Deposits - The Beginning of Lending Operations for China Postal Savings

This paper describes the initial success of the 'China Postal Savings (CPS) and Remittance Bureau' in offering micro-loans secured by time deposits. The note discusses:

• The background of the pilot project on micro-loans secured by time deposits.
• Development of the 'micro-loans secured by time deposits', stating that:
  • These loans are small-sized term loans;
  • The loan term is 12 months;
  • The market for such loans is huge and consists of unmet demand for microcredit from middle- and low-income households in rural China;
  • AS per the CPS, this kind of micro-loan can target small and poor farmers;
  • These loans would enable CPS to conduct successful lending operations and develop other micro-loan products in the future.
• The administration of the micro-loans including:
  • Upgradation of loan application and approval procedures;
  • Improvement in management of branches and staff;
  • Computerization to mitigate risks;
  • Operation on two parallel channels;
  • Application of the cash system to the interest income and expenses.

The note concludes by discussing:

• The expansion of the project into various provinces;
• The role of these micro-loans in making rural credit more accessible;
• A trial lending program for China Postal Bank;
• The help received from the bank regulator.