SHANGHAI encourages overseas and out-of-town investors to set up small-sum credit companies in a bid to help the city's small enterprises have access to loans, local financial authority said yesterday.

Small enterprises are big job creators although they do not pay huge taxes. But they are under-financed as most lack collateral to secure loans from banks, especially amid the current tight monetary policy. To cover the gap in credit access, small-sum credit companies have quickened their growth since they were allowed in the city in 2008 to quench the hunger for loans from the small firms.

"We are open to investors who are interested in the sector, whether from overseas or out-of-town," said Liu Xiaokun, deputy director of the departments of local finance administration and new finance development at Shanghai Financial Services Office.

The office, under the Shanghai municipal government, is the main regulator for the business.

Investors from Hong Kong and provinces of Hainan, Zhejiang and Jiangsu have showed interest to start up small-sum companies in Shanghai, he said.

In Shanghai, only 10 percent of the 300,000 small- and medium-sized companies have access to bank loans.

Lacking collateral, solid financial reports and guarantee has made it difficult for small companies to get loans, said Tu Youfu, director of financial cooperation department under the office.

In the city, loans from small-sum credit companies have an average maturity of seven months. And the average interest rates are around 17 percent.

At the end of July, the city has approved 69 small-sum credit companies, of which 64 have already started operating. They have extended more than 15,000 loans worth more than 30 billion yuan (US$47 billion).

But the small-sum credit companies can't take public deposits. They are encouraged to offer loans to rural family firms and mini enterprises.