Home

A long history of credit risk management

The financial leasing industry was born in the 1960s out of a need for an alternative to the traditional means of borrowing from banks and government bonds. Developed countries recognised a gap in financing options and the financial leasing industry’s expansion kept up with the pace of growing economies.

Although Chinese banks provide 80% of financing in the country, the main beneficiaries have been large enterprises and many are state owned. Lending to smaller businesses with little or no financial track record or guarantee prohibits the banks from exposing themselves to such risk. Although banks have provided working capital loans there has been a particular shortage of medium to long term financing options for SMEs.

This has spawned the exponential growth of the financial leasing industry to provide the 10 million or so SMEs in China with borrowing more specifically tailored to their needs. As with its economy, the financial leasing industry in China started late but has seen impressive growth over the last fifteen years. Entering the World Trade Organisation in 2001 brought foreign and domestic investors to the country and the financial leasing industry was given a further boost by the favourable regulatory policies. These were designed by the Chinese government to encourage investment and support the financial leasing industry during the period of economic growth.