Small businesses turn to underground banking market despite rate cut

Funding costs for small enterprises on the mainland have yet to show any signs of easing despite the central bank’s interest rate cut last month, South China Morning Post reported. Small firms must compete with larger companies and individual borrowers to access funds, resulting in many turning to the underground banking market. Borrowing rates in the black-market remain as high as 2% a month after the central bank reduced interest rates to 5.6%. An underground banking operator explained that “the central bank’s rate cut benefits only the big corporate clients,” while “small firms and individuals will still have to borrow from people like us.”