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Published on Jun 18, 2012
In China, allowing the use of movable assets such as farm equipment, livestock and accounts receivable to secure loans has unlocked more than $3 trillion in credit, including $1 trillion for small entrepreneurs.
"Thanks to the accounts receivable pledge, our credit line from the bank was increased," says Xiong Yun, Financial Manager of Tianyue, a Chengdu-based producer and installer of window frames for buildings. "We are now able to take some larger orders with longer terms of payments. This has enabled the sustainable development of our company's business."
IFC, a member of the World Bank Group, helped the Chinese government draft and pass regulation in 2007 that paved the way for banks to accept movable assets and increase their lending to small and medium enterprises. To further strengthen the financial infrastructure to support movable-asset financing, we advised the central bank, the People's Bank of China, to set up and run a centralized online system for banks to register borrowers' movable assets, making it easier for banks to process loans.
The effect has been phenomenal: The value of commercial loans secured by movable assets grew by 24 percent per year from 2008 to 2010. As of June 2011, more than $3 trillion in loans have been granted through movable asset financing; many of the beneficiaries are small businesses.
IFC is the largest global development institution focused exclusively on the private sector. For more information, visit www.ifc.org/eastasia.