OREANDA-NEWS. May 19, 2011. ICBC is now actively promoting small-and-medium enterprises (SMEs) to sell bonds via private placements, according to a source from ICBC Global Market Department. The purpose is to add direct financing channel to address the chronic lack of credit available to SMEs, reported the press-centre of ICBC.

As related by the ICBC executive, the National Association of Financial Market Institutional Investors, or NAFMII, published the Rules on Private Placement of Debt Instruments of Non-Financial Firms in Interbank Bond Market on April 29, marking another major innovation in private placement of bonds by non-financial firms in the domestic interbank market. This implies public bonds offerings in parallel with private-placement bonds instead of only public offering as before. To all the small and mid-sized business owners, this is a major benefit for them to raise fund from another channel.

The ICBC executive said, SMEs find it hard to get business funding via public offering due to small sizes, low ratings, while investors in private placement are designated investment institutions in the market. Depending on own requirements, issuers have the options to flexibly negotiate with the targeted investors the financing solution concerning the purpose of funds, term, guarantee and ratings. As a result, they follow the self-regulation code, registration and filing as required by NAFMII to secure funding in a lawful manner and in compliance with regulations. More important is that private-placement bonds usually have interest rate lower than bank loan rate, which translates to savings in interest cost of financing. This is crucial to SMEs which are generally smaller in scale and not well-capitalized. Hence, the launch of private placement offers a valued insight and channel for addressing the financing gap of the SMEs.