Green Finance Helps China’s Small & Mid-Sized Businesses

In the traditional finance system, small and medium-sized enterprises (SMEs) are often shortchanged and overlooked for their larger counterparts by lenders due to their perceived higher risks. Can fintech help create a financial system that is not only green, but also addresses this gap for SMEs? It’s an important topic in China, as the country has a large number of SMEs and an ambitious green finance agenda. In a new joint report, the  Paulson Institute Green Finance Center  and the  Research Center for Green Finance Development at Tsinghua University  offer insightful case studies that broaden our understanding of the ways fintech can be applied to the world of green finance. This is the second part in a four-part blog series.

Small and medium-sized companies play a critical role in the Chinese economy. They create more jobs, pay more taxes, spur more innovation, and account for more national GDP than China’s large businesses. But despite their large and important economic footprint, China’s SMEs often have less access to the financial resources they need to go “green” and meet the country’s sustainability goals. An effort by the Huzhou local government is trying to change this by creating a Green Finance One-Stop Service Platform.

What is the Green Finance One-Stop Service Platform?

Piloted by the Huzhou local government, it is a tech platform that provides a number of important financial services to support the green development of small and medium enterprises.

What services does the Platform provide?

The One-Stop Service platform provides three primary services for SMEs.

• First, it connects businesses with banks, using technology to integrate the financial offerings of all 36 banks in Huzhou and offering over 300 lending products. It also consolidates the data of 31 local government agencies to enable information sharing across government agencies and increase the financing efficiency of green SMEs. 

• Second, it connects businesses with investors, providing transparent information about the financing needs of Huzhou’s small businesses. This helps ease the difficulty and limit the costs involved in searching for green projects.

• Third, it provides green identification services to SMEs via a Green Credit Rating Platform, which allows market participants to efficiently identify which companies meet the government’s green standards.

What are the results of the Platform so far?

Since its launch in 2018, the Platform has registered over 16,000 SMEs, 30 financial institutions, and close to 80 investors. It has helped more than 13,000 green SMEs obtain credit exceeding RMB 160 billion from banks. And it has found investors for 73 projects that received financing of more than RMB 6.6 billion. 

What’s next?

• The Huzhou local government plans to expand the platform by incorporating judicial safeguards that will eventually help prevent and resolve financial disputes between companies and banks.

• The government is also working on a number of operational improvements, including a cross-agency coordination and safeguard mechanism.

• Finally, the government wants to scale and share its experience with other provinces and cities.