Performing and evaluating creditworthiness: Bank loans and the financial inclusion of micro/small enterprises in China

Abstract

Despite being key to China's economic development, micro and small enterprises have long faced difficulties in accessing bank financing. Consequently, the government has introduced digital lending platforms like “Credit Easy Loan” to enable “creditworthy” microentrepreneurs to obtain collateral-free loans. These platforms are expected to collect and integrate social credit data, thus easing the information asymmetry between banks and private enterprises. Based on 10 months of fieldwork in two Chinese cities, this paper investigates banks’ digital and nondigital credit assessment practices and the varied experiences of business loan applicants. It finds that banks and microentrepreneurs may work with underground intermediaries to manipulate application material for different purposes. Microentrepreneurs, especially those without local tangible assets or social networks, still face credit constrains, and discrimination in loan applications. This paper hopes to further our understanding of the social practice around digitalized credit and the dynamics between financial inclusion policies and local implementation.