Keen to tap into another source of revenue and profit amid a tight monetary policy, banks in Shanghai are wooing small and medium-size companies at an exposition.

More than 500 financial services experts from about 28 domestic and overseas banks were at the two-day exhibition, the third to be held, in the Shanghai Exhibition Center yesterday.

The Shanghai branch of the Industrial & Commercial Bank of China teamed up with 12 guarantee companies yesterday to offer a combined guarantee quota of 3.78 billion yuan (US$539 million) for SMEs. Its branch has issued more than 100 billion yuan of loans to SMEs since 2003.

The Shanghai branch of the Guangdong Development Bank also signed contracts with SMEs yesterday.

With the central bank tightening liquidity to curb inflation, some banks said they will boost lending to promising SMEs via lending or fee-based services as these are profit generators.

Banks can ask for higher interest rates from SMEs due to limited lending sources amid the tight monetary policy. Shifting focus to fee-based income will also help them to offer more intermediary revenue-generating services like factoring.

Yan Qingmin, head of the Shanghai Bureau of the China Banking Regulatory Commission, said banks should adjust their lending structure amid the current tight credit squeeze.

In Shanghai, SMEs account for 99 percent of total companies in terms of volume and employed more than 82 percent of the city's workforce. Their revenue accounts for 55 percent of the total.

(Shanghai Daily April 3, 2008)