(Yicai) Dec. 7 -- Guangzhou, the capital city of southern China’s Guangdong province, has recently kicked off a pilot program to integrate local financial institutions into the credit reporting system of the People’s Bank of China to better supervise local small-sized financial institutions.

The pilot project will lower the fees and shorten procedures for local financial institutions to join the PBOC’s credit reporting system and require financial institutions to carry out financial activities only with specific licenses and that all types of such activities should be thoroughly supervised, Xu Bei, secretary-general at Guangdong province’s association of small loan companies, told Yicai.

As of Sept. 30, Guangzhou boasted over 1,600 local financial organizations of various kinds, with a total registered capital of about CNY109 billion (USD15.2 billion).

“Market insiders believe that the duration of the integration procedures could be shortened to around three months, which would stimulate the enthusiasm of local financial institutions to join the credit reporting system,” Xu said.

Most Chinese local financial organizations have not yet been integrated into the PBOC’s credit reporting system because they are usually small-sized and have relatively weaker technological strengths. Yicai learned that less than 10 Guangzhou-based small loan firms were included in the PBOC’s credit reporting system before the pilot project started.

Inclusion into the central bank’s credit reporting system requires a one-time hardware investment of about CNY2 million (USD280,640), Xu noted, adding that daily maintenance expenses are also necessary.

“If people have borrowing records from small loan firms in their credit reports, their chances of being able to borrow money from other financial institutions may be affected,” Xu explained. Such potential “credit record discrimination” resulted in small loan companies being unwilling to be integrated into the PBOC’s credit reporting system, he added.

After acknowledging the difficulties Guangzhou-based financial institutions face when joining the central bank’s credit reporting system, the PBOC’s credit reporting center asked its branch in Guangdong and the Shanghai Credit Information Services to offer one-stop services, such as inclusion assistance and technology support, to local financial organizations in Guangzhou.

Editors: Shi Yi, Futura Costaglione