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On August 23, the State Financial Supervision and Administration Bureau publicly solicited opinions on the Interim Measures for the Supervision and Administration of Microfinance Companies (Draft for Comments). Online microfinance companies should ensure that core business links such as loan application acceptance, risk review, loan approval, loan issuance and loan recovery are completed through online operations. Microfinance companies are not allowed to conduct business across provinces, autonomous regions and municipalities directly under the Central Government. The conditions for microfinance companies to conduct business across cities and prefectures shall be stipulated by provincial local financial management agencies. The loan balance of online microfinance companies for consumption by a single household shall not exceed RMB 200,000, and the loan balance of each type of loan for production and operation by a single household shall not exceed RMB 10 million.

Interim Measures for the Supervision and Administration of Microfinance Companies

(Draft for comments)

Chapter I General Provisions

Article 1 [Purpose and Basis] These Measures are formulated in accordance with relevant laws and regulations in order to standardize the behavior of microfinance companies, strengthen supervision and management, prevent and resolve risks, and promote the stable operation and healthy development of microfinance companies.

Article 2 [Applicable Persons] These Measures apply to microfinance companies established in accordance with the law within the territory of the People's Republic of China.

Online microfinance companies shall comply with all provisions of these Measures regarding microfinance companies.

Article 3 [Definition] The microfinance company referred to in these Measures means a local financial organization established in accordance with the law within the territory of the People's Republic of China, which does not accept public deposits and mainly engages in microfinance business.

The online microfinance company referred to in these Measures refers to a microfinance company engaged in online loan business.

Article 4 [Operating Principles] Microfinance companies shall comply with the relevant provisions of laws and administrative regulations when conducting their business, follow the principles of equality, voluntariness, fairness and honesty and trustworthiness, and shall not harm national interests, social public interests and the legitimate rights and interests of consumers.

Article 5 [Business Objectives] Microfinance companies should adhere to the principles of small amounts and dispersion when conducting their business, give full play to their advantages of flexibility and convenience, practice the concept of inclusive finance, and mainly serve groups such as small and micro enterprises, farmers and individual consumers, promote the expansion of consumption, and support the development of the real economy.

Article 6 [Local Responsibilities] Provincial local financial management agencies are responsible for supervising, managing and managing risks of microfinance companies in their respective regions.

Major matters such as the establishment and termination of microfinance companies shall be under the unified responsibility of provincial local financial management agencies and shall not be delegated to other departments.

On the premise of insisting on overall provincial responsibility, provincial local financial management agencies can authorize institutions at the centrally-administered municipality, prefecture-level city, and county levels that are responsible for the supervision of microfinance companies to carry out off-site supervision, on-site inspections, and investigation and punishment of illegal and irregular activities.

Article 7 [Responsibilities of the General Administration and its dispatched agencies] The State Financial Supervision and Administration Bureau is responsible for formulating regulatory rules for microfinance companies and providing business guidance and supervision to local government agencies that are responsible for the supervision of microfinance companies.

The dispatched agencies of the State Financial Supervision and Administration Bureau should, in accordance with their duties, strengthen coordination with local financial management agencies on the supervision of microfinance companies.

Chapter II Business Operation

Article 8 [Approval] The establishment of a microfinance company to engage in microfinance business shall be subject to review and approval by the provincial local financial management agency in accordance with the provisions of laws, administrative regulations, etc., and shall be filed with the State Financial Supervision and Administration Bureau.

Article 9 [Business Scope] A microfinance company may operate some or all of the following businesses in accordance with the law and list them in its business scope:

(1) Granting small loans;

(2) discounting of commercial bills;

(3) Financing consulting, financial advisory and other intermediary services related to loan business;

(iv) Other businesses prescribed by laws, administrative regulations and the State Financial Regulatory Administration.

Microfinance companies are not allowed to issue or sell financial products such as wealth management, trusts, and funds on behalf of others.

Article 10 [Business Development Methods] Online microfinance companies shall ensure that core business links such as loan application acceptance, risk review, loan approval, loan issuance and loan recovery are completed through online operations.

If it is indeed necessary for credit approval and credit management, online microfinance companies can assist in conducting pre-loan field investigations, asset verification, overdue loan collection and other work offline.

Article 11 [Operating Area] Microfinance companies shall be based locally and conduct business within the area approved in accordance with the law.

Microfinance companies are not allowed to conduct business across provinces, autonomous regions, and municipalities. The conditions for microfinance companies to conduct business across cities and prefectures are stipulated by provincial local financial management agencies.

The conditions for the operating areas of online microfinance companies shall be stipulated separately.

Article 12 [Contract Elements] When a microfinance company issues a loan, it shall enter into a written contract with the borrower in accordance with the law, which shall specify such matters as the loan type, purpose, amount, comprehensive actual interest rate, term, repayment method, and liability for breach of contract.

Article 13 [Loan Review] Microfinance companies shall review the borrower’s purpose of borrowing, actual needs, income level, asset status, overall liabilities, etc., and reasonably determine the loan amount and term.

Microfinance companies are not allowed to issue loans that clearly exceed the borrower's ability to repay.

Article 14 [Commercial Bill Discounting] Microfinance companies that engage in commercial bill discounting business must meet the following conditions: good operating and financial conditions, no continuous overdue bills or failure to disclose information as required in the past two years, and obtain the approval of provincial local financial management agencies.

Article 15 [Loan Concentration] The balance of various loans of a microfinance company to the same borrower shall not exceed 10% of its net assets, and the balance of various loans to the same borrower and its affiliates shall not exceed 15% of its net assets.

The loan balance of an online microfinance company for a single household for consumption shall not exceed RMB 200,000, and the loan balance of all types of loans for a single household for production and operation shall not exceed RMB 10 million.

Article 16 [Purpose of Loans] Microfinance companies shall clearly agree with borrowers on the purpose of loans and monitor the use of loans in accordance with the contract. The purpose of loans shall comply with laws and regulations, national macroeconomic regulation and industrial policies, and shall not be used for the following purposes:

(1) Financial investments such as stocks, bonds, futures, financial derivatives and asset management products;

(2) Equity investment;

(3) repayment of loans or other financing;

(iv) Other purposes prohibited by laws, administrative regulations or the State Financial Regulatory Administration.

Article 17 [Cooperative Loans] Where a microfinance company cooperates with a third-party institution to conduct loan business, it shall comply with the following requirements:

(1) Core businesses such as credit review and risk control shall not be outsourced;

(2) It is not allowed to jointly invest in lending with institutions without lending qualifications;

(3) It is prohibited to accept credit enhancement services or disguised credit enhancement services such as guarantee commitments provided by institutions that are unsecured and do not meet the credit insurance and guarantee insurance business qualification supervision requirements;

(iv) not helping cooperative institutions circumvent regulatory requirements such as off-site operations;

(V) Providing services such as marketing and customer acquisition, customer credit profiling and risk assessment, information technology support, and overdue collection without actual capital investment is prohibited;

(6) The proportion of capital contribution for a single joint loan shall not be less than 30 percent;

(VII) Other requirements prescribed by the State Financial Regulatory Administration.

Article 18 [Loan Interest Rate] Microfinance companies shall calculate the comprehensive actual interest rate as the ratio of all interest and fees charged to borrowers to the loan principal, convert it into an annualized form, and state it in the loan contract, and shall not violate relevant national regulations.

Microfinance companies shall pay the loan principal in full to the borrower in accordance with the amount agreed in the loan contract and shall not deduct interest, handling fees, management fees, deposits, etc. in advance.

Microfinance companies should abide by the principles of compliance with the law, prudent operation, equality, voluntariness, fairness and integrity, reasonably determine and gradually lower the comprehensive actual interest rate level for serving small and micro enterprises, farmers and individual consumers, support the development of inclusive finance and improve the efficiency of inclusive financial services.

Article 19 [Intermediary Services] Microfinance companies that provide intermediary services such as financing consulting and financial advisory related to loan business should charge fees based on the actual services provided to ensure that the quality and price are consistent. They shall not charge fees for services not provided, and shall not collect interest in disguised form in the form of fees.

Article 20 [Financing Channels] Microfinance companies may raise funds through non-standardized forms such as bank loans and shareholder loans, or through standardized forms such as issuing bonds and asset-backed securities (with loans issued by the company as underlying assets).

The source of funds for shareholder loans should be the shareholder’s own funds.

If a microfinance company issues asset securitization products based on the loans issued by the company, it shall meet the following conditions and obtain the approval of the provincial local financial management agency:

(1) Having a good corporate governance mechanism, a sound internal control system and a sound risk management system;

(2) Having a good reputation and having no major violations of laws and regulations in the past three years;

(3) Having a good regulatory rating;

(iv) Other conditions prescribed by laws, administrative regulations or the State Financial Regulatory Administration.

In addition to meeting the conditions stipulated in the preceding paragraph, microfinance companies that issue bonds must also have good business management and continuous profitability in the last three fiscal years, and must obtain the approval of the provincial local financial management agency.

Microfinance companies are not allowed to absorb or absorb public deposits in disguise, and are not allowed to raise funds through various local trading venues or private investment funds.

Article 21 [Financing Leverage] The balance of funds raised by a microfinance company through non-standardized forms such as bank loans and shareholder loans shall not exceed one times of its net assets.

The balance of funds raised by microfinance companies through standardized forms such as issuing bonds and asset-backed securities shall not exceed four times of their net assets.

Article 22 [Sources of lending funds] The sources of lending funds of microfinance companies are limited to their own funds and external funds.

Microfinance companies are not allowed to use funds such as pre-deposited deposits of cooperative institutions to issue loans.

Article 23 [Negative List of Business Operations] Microfinance companies shall not engage in the following business operations:

(1) Renting or lending licenses to provide lending “channels” for entities without lending business qualifications;

(2) Assisting entities without lending business qualifications to apply for registration of mobile applications (APPs) containing the word "finance";

(3) Transferring or transferring in disguised form the Company's other credit assets other than non-performing credit assets to entities without lending business qualifications;

(iv) Other acts prohibited by laws, administrative regulations or the State Financial Regulatory Administration.

Chapter 3 Corporate Governance and Risk Management

Article 24 [General Requirements] Microfinance companies shall establish corporate governance, internal control and risk management systems that match the nature, scale and complexity of their business.

Article 25 [Corporate Governance] Microfinance companies shall establish a corporate governance structure with sound organization, clear responsibilities, effective checks and balances, and reasonable incentives and constraints, clarify the boundaries of responsibilities and performance requirements of each governance entity, and build a corporate governance mechanism with scientific decision-making, strong execution, and effective supervision to continuously improve the level of corporate governance.

Article 26 [Internal Control] Microfinance companies shall establish and improve an internal control system, strictly separate authorization and approval, and review and loan, establish an approval and decision-making procedure with clear rights and responsibilities, clear processes, and effective operation, strengthen the management of the entire loan process, implement various requirements such as due diligence, review and approval, risk control, and follow-up management, and ensure that all systems are implemented in place.

Article 27 [Risk Management] Microfinance companies shall formulate and implement comprehensive, systematic and standardized business rules and management systems in accordance with prudent operation requirements, including asset quality, risk provisions, risk concentration, information disclosure, related transactions, liquidity management, etc., to effectively identify and control various risks in business and management activities.

Microfinance companies should establish and improve the bill business management system, prudently carry out commercial bill discounting business, and take effective measures to prevent market risks, credit risks and operational risks.

Article 28 [Asset Classification] Microfinance companies shall establish a standardized asset risk classification system and risk reserve system, strengthen asset quality management, make timely and sufficient risk provisions, and improve their ability to withstand risks.

Microfinance companies should classify loans that are overdue for more than ninety days as nonperforming loans.

Article 29 [Special Account for Lending] Microfinance companies should strengthen fund management and implement special account management for lending funds. All funds must be deposited into special accounts for lending.

Microfinance companies shall report their special lending accounts to provincial local financial management agencies, and provide special lending account operation reports and special lending account fund flow details issued by the opening bank on a regular basis as required.

Microfinance companies are not allowed to use the personal accounts of shareholders, senior management, internal employees, and related persons to issue and recover loans.

Article 30 [Management of Related-Party Transactions] Microfinance companies shall establish and improve related-party transaction management systems and comprehensively and accurately identify related parties. Related-party transactions shall comply with laws, regulations and relevant regulatory provisions, strictly follow the principles of honesty and trustworthiness, openness and fairness, penetrating identification, clear structure and business principles, and shall not be better than similar transaction conditions for non-related parties.

Major related-party transactions of microfinance companies must be approved by the shareholders' meeting or the board of directors, and shareholders or directors who have an affiliation with the related-party transactions shall not participate in the voting on the transaction.

Microfinance companies should strengthen the disclosure of related-party transactions and disclose information such as related parties and related-party transactions in the notes to the financial statements. Major related-party transactions should be disclosed one by one, while other related-party transactions may be disclosed on a consolidated basis.

Article 31 [Management of cooperative institutions] Microfinance companies should strengthen the list management of cooperative institutions, ensure that the mobile applications (APPs), mini-programs, and websites of cooperative institutions are registered in accordance with the law, promptly identify and assess the risks that may be caused by violations of laws and regulations by cooperative institutions, and urge cooperative institutions to implement compliance management and consumer rights protection responsibilities.

Cooperating institutions include but are not limited to various institutions that cooperate with microfinance companies in marketing and customer acquisition, capital investment and loan issuance, payment settlement, risk sharing, information technology, and overdue collection.

Article 32 [Information Construction] Microfinance companies should strengthen information construction, formulate information technology strategies that are in line with the company's business plans, improve information technology governance, incorporate information technology risk management into the risk management system, establish and improve information technology management systems, build information systems such as business management and financial management, incorporate various business links into information system management, and submit off-site supervision data within the time limit.

Microfinance companies should strengthen network security management, data security management, business continuity management and information technology outsourcing management, implement the national network security level protection system, carry out network security classification and filing, conduct level protection assessments on a regular basis, fully identify, monitor and control information technology risks, and ensure the safe and stable operation of information systems.

Microfinance companies should deepen the application of data in business operations and risk management, and actively use digital technology to improve their financial service capabilities.

Article 33 [Internet Business Information System] The Internet business information system used by online microfinance companies shall comply with the following requirements:

(1) It can support online operations of the entire business process including loan application, assessment, approval, contract signing, loan disbursement and loan collection, and can fully record and properly preserve relevant data and information;

(2) Comply with network security and data security management requirements, have complete network security facilities and management systems such as firewalls, intrusion detection, data encryption, emergency response plans, and disaster recovery to ensure safe and stable operation of the system and the security of various types of information;

(3) The cybersecurity level protection rating of the business system shall be no lower than level 3;

(IV) The business system shall be established and independently operated by the legal entity in accordance with the law and shall enjoy full data authority. It shall carry out website filing, mobile application (APP) and mini-program filing in a standardized manner, and prevent and monitor counterfeit websites, counterfeit mobile application (APP) and counterfeit mini-programs;

(5) Other conditions prescribed by the State Financial Regulatory Administration.

Article 34 [Risk Prevention and Control System] Online microfinance companies shall have a sound risk prevention and control system, including data-driven risk control models, anti-fraud systems, risk identification mechanisms, risk monitoring methods, risk disposal measures, customer identity identification and registration systems, etc.

Online microfinance companies should mainly rely on endogenous data information of the Internet platform and other data information obtained through legal channels to assess and prevent and control customer credit risks.

Article 35 [Anti-Money Laundering] Microfinance companies shall carry out anti-money laundering and anti-terrorist financing work in accordance with relevant laws and regulations, and take measures such as customer identity identification, preservation of customer identity information and transaction records, and reporting of large transactions and suspicious transactions to effectively prevent money laundering and terrorist financing risks.

Article 36 [Special Provisions] Microfinance companies with smaller scale or fewer shareholders may simplify their organizational structure and explore the establishment of practical, effective and practical internal control and risk management methods and means.

Chapter IV Protection of Consumer Rights and Interests

Article 37 [General Requirements] Microfinance companies shall protect the rights and interests of financial consumers in accordance with laws and regulations and relevant requirements of the State Financial Regulatory Administration, and safeguard consumers' legitimate rights and interests such as the right to know, the right to choose independently, the right to fair trade, and the right to information security.

Microfinance companies should implement their main responsibilities for protecting consumer rights and interests, establish and improve a system and mechanism for protecting consumer rights and interests, and implement consumer rights protection requirements in all aspects of their business processes.

Article 38 [Information Disclosure] Microfinance companies shall comprehensively disclose relevant information such as loan types, comprehensive actual interest rates, charging items and standards, service contents, etc. in their business premises, promotional materials, websites, or Internet applications such as mobile applications (APPs), and fully disclose risks in simple and easy-to-understand language.

Online microfinance companies should strengthen information disclosure and publish the following information on the product release platforms they use:

(1) Basic company information, including business license, online microfinance company business qualification documents, company address, basic information of legal representative and senior management personnel, business consultation and complaint telephone numbers, etc.;

(ii) A detailed description of the relevant products provided by the company, including service content, comprehensive actual interest rate, charging items and standards, interest calculation and principal and interest repayment methods, and methods for handling overdue loans;

(III) Risk warnings for loan products provided by the company, including that borrowers who fail to provide true and complete information as promised in the contract, fail to use the loan for the purpose specified in the contract, fail to repay the loan as specified in the contract, etc. will be held liable for breach of contract and included in the credit record in accordance with the law;

(iv) Other information required by the State Financial Regulatory Administration.

If any of the information in the first two paragraphs changes, the original disclosed information should be updated within seven working days after the change.

Article 39 [Report] If a microfinance company issues loans, releases loan products, or conducts marketing and customer acquisition through mobile applications (APPs), mini-programs, websites, and other Internet platforms (including its own and those of its partners), it shall report the mobile application (APP), mini-programs, websites, and other Internet platform information and product details to the local financial management agency.

Article 40 [Notification] Microfinance companies shall follow the principles of openness and transparency, fully fulfill their obligation to inform, and make reading the contract a prerequisite for formally submitting a loan application. The loan subject, type, amount, comprehensive actual interest rate, charging items and standards, principal and interest payment arrangements, overdue collection, breach of contract liability and other contents shall be clearly stated in the contract.

Article 41 [Prohibited Behaviors] Microfinance companies shall not engage in the following behaviors:

(1) Conducting marketing promotions in a fraudulent or misleading manner, unilaterally promoting low thresholds, low interest rates, high loan amounts, etc., and inducing borrowers to over-indebtedness and multiple loans;

(2) Granting loans to borrowers that are inconsistent with their loan purposes and repayment capabilities by means of inducement, deception, coercion, etc.;

(3) Promoting unsecured personal loans to minors and promoting credit products to students as target customers;

(iv) making the loan the default payment option;

(V) Selling goods or services in bundled sales or attaching other unreasonable conditions against the borrower's will.

Article 42 [Loan Collection] Microfinance companies shall establish a collection management system for overdue loans and standardize the procedures and methods for loan collection in accordance with laws and regulations, the requirements of the State Financial Regulatory Administration and provincial local financial management agencies. Microfinance companies and their authorized third-party agencies shall not engage in the following acts when collecting loans:

(1) Using or threatening to use violence, or otherwise harming another person's body, reputation, or property;

(2) Insulting, defaming, threatening, stalking, harassing, or otherwise interfering with others' normal work and life;

(3) Using illegal means such as misleading or deceiving;

(iv) illegally occupying the borrower's property;

(V) Violating relevant regulations to disclose the borrower's identity, address, contact information, contact person and other related information;

(6) collecting debts from persons other than entities or individuals that are obliged to perform debts in accordance with legal provisions or contractual agreements;

(VII) Other acts of collecting loans by illegal or improper means.

Microfinance companies are not allowed to entrust third-party institutions with a record of violent debt collection and other illegal and irregular behaviors to collect loans. If a microfinance company finds that a partner institution has engaged in illegal and irregular behaviors such as violent debt collection, it shall immediately terminate the cooperation and promptly transfer the clues of illegal and irregular behaviors to the relevant departments.

Article 43 [Information Protection] Microfinance companies and the Internet platforms they use shall collect, store and use customer information in accordance with the principles of legality, legitimacy and necessity. They shall remind customers to read the contents of the authorization letter in a prominent position on the relevant pages and disclose the content, usage and period of the collected information in the authorization letter to ensure that customer information can only be collected, stored and used after the customer has read the authorization letter and signed their consent.

Microfinance companies should handle the customer information they store in accordance with laws and regulations and agreements with customers, and must not disclose or tamper with customer information.

Without the customer's authorization or consent, microfinance companies and the Internet platforms they use shall not collect, store, use, process, transmit, provide to others, disclose, or delete customer information, except as otherwise provided by laws and regulations.

Article 44 [Complaint Handling] Microfinance companies shall establish and improve a consumer complaint handling system, open up complaint acceptance channels, clarify feedback mechanisms, and actively and properly handle consumer complaints in accordance with the law and regulations.

Article 45 [Multi-party dispute resolution] Microfinance companies should improve the supporting mechanism for the diversified resolution of conflicts and disputes, and actively resolve conflicts and disputes with consumers through negotiation, mediation and other means.

Chapter 5 Exit of Microfinance Companies with Abnormal Operations

Article 46 [Handling of serious illegal and irregular business operations] For microfinance companies that have committed serious illegal and irregular operations, provincial local financial management agencies may cancel their microfinance company business qualifications in accordance with relevant laws, regulations and regulatory requirements, and require them to go to the market supervision department to register changes in their names and business scope or cancel their registration within the prescribed time limit.

If a microfinance company changes its name or business scope, it shall make clear arrangements for its outstanding debts and claims.

Article 47 [Handling of lost contact or empty shell institutions] Provincial local financial management institutions shall make public announcements to the society regarding "lost contact" or "empty shell" microfinance companies. If there are no objections after the publicity period, the relevant companies shall be guided to the market supervision departments to handle the registration of name and business scope change or cancellation of registration.

For any business that is determined to have been suspended for a long period of time and meets the circumstances for revoking its business license as stipulated in Article 260, Paragraph 1 of the Company Law of the People's Republic of China and the Interim Regulations on the Public Disclosure of Enterprise Information, the provincial local financial management agency shall request the market supervision department to revoke its business license in accordance with the law.

Provincial local financial management agencies shall cancel the business qualifications of "lost contact" or "shell" microfinance companies that have changed their name or business scope registration or cancelled their registration, or whose business licenses have been revoked in accordance with the law.

Article 48 [Standards for Identifying Lost Contact] A company that meets any of the following conditions shall be identified as a “lost contact” company:

(1) Unable to contact;

(2) The company cannot be found through on-site inspection at its address;

(3) Although the company staff can be contacted, they are not aware of and cannot contact the actual controller of the company;

(IV) Failure to submit data and information in accordance with regulatory requirements for three consecutive months.

Article 49 [Shell Company Identification Standards] A company that meets any of the following conditions shall be identified as a “shell” company:

(1) Not carrying out loan issuance and other business without justifiable reasons in the past six months or voluntarily suspending business;

(2) No tax payment record or “zero tax declaration” in the past six months (except for those who enjoy tax exemption under the national tax preferential policies);

(3) No social security payment record in the past six months.

Article 50 [Termination] If a microfinance company is dissolved or declared bankrupt due to poor management, it shall be liquidated and cancelled in accordance with the law, and the liquidation process shall be supervised by the provincial local financial management agency.

After the liquidation is completed or the bankruptcy procedure is terminated, the liquidation agency shall promptly submit a liquidation report to the provincial local financial management agency and apply to the company registration authority for cancellation of registration.

Provincial local financial management agencies shall promptly disclose to the public information on the cancellation or revocation of business qualifications of microfinance companies.

Chapter VI Supervision and Management

Article 51 [Supervisory Responsibilities] Provincial local financial management institutions shall establish and improve a supervision and management system, and adopt supervisory measures such as review and approval, off-site supervision, on-site inspections and investigations, and supervisory talks with respect to microfinance companies in accordance with the law.

Article 52 [Market Access Supervision] Provincial local financial management institutions shall strictly follow the existing regulations, strictly implement standards and standardize processes, strengthen communication and coordination with market supervision departments, strictly control the access of microfinance companies, and strengthen the review of shareholders' credit level, source of investment funds, and risk management capabilities.

The major shareholders and actual controllers of a microfinance company should have good financial status and integrity records.

Article 53 [Off-site Supervision] Local financial management institutions shall strengthen off-site supervision of microfinance companies, collect data and information such as financial statements, business management materials, and audit reports of microfinance companies in accordance with the law, and conduct supervisory analysis and evaluation of the business activities and risk status of microfinance companies.

Provincial local financial management institutions shall submit regulatory data information and risk analysis reports to the State Financial Supervision and Administration Bureau on a regular basis in accordance with the off-site supervision system formulated by the State Financial Supervision and Administration Bureau.

Local financial management agencies should strengthen the review of information and product details of mobile applications (APPs), mini-programs, websites and other Internet platforms (including self-owned and cooperative institutions) reported by microfinance companies. If it is found that a microfinance company's own platform has not been registered in accordance with the law, the microfinance company should be ordered to make rectification within a time limit. If it is found that a cooperative institution platform has not been registered in accordance with the law, the microfinance company should be ordered to terminate cooperation with it.

Article 54 [On-site Inspection and Investigation] Local financial management institutions shall conduct on-site inspections and investigations of microfinance companies in accordance with the law, and take measures such as entering the office or business premises of the microfinance company to conduct inspections and investigations, questioning personnel related to the matters being inspected and investigated, reviewing and copying documents and materials related to the matters being inspected and investigated, and copying relevant data and materials from the business system, so as to gain an in-depth understanding of the company's operating conditions and identify illegal and irregular activities.

When inspection and investigation personnel of local financial management institutions conduct on-site inspections and investigations in accordance with the law, relevant units and individuals shall cooperate, truthfully explain the relevant circumstances, and provide relevant documents and materials, and shall not refuse, obstruct or conceal.

Local financial management agencies should select a certain proportion of microfinance companies for on-site inspections every year to achieve full coverage for three years.

Article 55 [Supervisory Talks] Local financial management agencies may, as necessary to perform their duties, conduct supervisory talks with the directors, senior managers, controlling shareholders, actual controllers, etc. of microfinance companies and require them to explain matters such as the business activities and risk management of the microfinance companies.

Article 56 [Classification Supervision] Provincial local financial management institutions shall establish a supervision and evaluation system for microfinance companies, conduct supervision ratings on microfinance companies based on their business scale, management level, compliance status, risk status, etc., and implement classified supervision and management of microfinance companies based on the rating results.

Article 57 [Behavioral Supervision] Local financial management institutions shall regularly conduct supervision and inspection on the consumer rights protection work of microfinance companies, strengthen the main responsibility of microfinance companies for handling consumer complaints, and promptly correct the behavior of microfinance companies that infringe upon the legitimate rights and interests of consumers.

Article 58 [Risk Management] If a microfinance company encounters major risks and seriously damages the legitimate rights and interests of creditors and customers, the provincial local financial management agency shall organize and carry out risk management in accordance with the law.

Article 59 [Handling of illegal and irregular operations] If a microfinance company operates illegally or irregularly and relevant laws and regulations have penalty provisions, the provincial local financial management agency shall coordinate with relevant departments to impose penalties in accordance with the provisions; if a crime is suspected, the case shall be transferred to the public security organs for investigation and punishment.

If the relevant laws and regulations do not provide for penalties or the penalty standards are not met, the provincial local financial management agency may take measures such as regulatory talks, issuing warning letters, ordering corrections, public notifications, and entering the information database of illegal and irregular business operations and publishing them.

Article 60 [Sharing of Regulatory Information] Local financial management institutions and the dispatched agencies of the State Financial Supervision and Administration Administration shall establish a regulatory information sharing mechanism for microfinance companies, share relevant regulatory information in a timely manner, and strengthen regulatory coordination.

Chapter VII Supplementary Provisions

Article 61 [Industry Self-Discipline] The China Small Loan Company Association and other small loan company industry self-discipline organizations should play an active role, strengthen industry self-discipline management, improve the quality of practitioners, increase industry publicity efforts, safeguard the legitimate rights and interests of the industry, and promote the standardized and healthy development of the industry.

Article 62 [Implementation Rules] Provincial local financial management institutions may formulate or revise implementation rules for the supervision and management of microfinance companies in their jurisdictions in accordance with laws, regulations and these Measures, and submit them to the State Financial Supervision and Administration Administration for filing within twenty working days from the date of publication.

According to regulatory needs, provincial local financial management agencies may make more stringent and prudent regulations in the implementation rules on matters such as the loan concentration, financing multiples, number of special lending accounts, and standards for identifying major related transactions of microfinance companies.

Article 63 [Transition Period] Microfinance companies shall gradually meet the requirements of the provisions of these Measures within the transition period specified by the provincial local financial management agency.

The transition period shall not exceed one year. Among them, the transition period for the upper limit of RMB 10 million for the production and operation loans of online microfinance companies shall not exceed two years. If an extension is really necessary, it shall be reported to the State Financial Supervision and Administration Bureau for approval.

Article 64 [Meaning of Terms] The following terms in these Measures have the following meanings:

(1) Major shareholder refers to a shareholder who holds or controls more than 5% of the company's shares or voting rights, or a shareholder who holds less than 5% of the shares but has a significant influence on the company's decision-making and management.

(2) Actual controller refers to a person who is not a shareholder of the company but can actually control the company's behavior through investment relations, agreements or other arrangements.

(III) Related parties refer to parties that control, jointly control or exert significant influence over another party, or two or more parties that are controlled, jointly controlled or significantly influenced by one party, in accordance with the provisions of Accounting Standard for Enterprises No. 36 Disclosure of Related Parties. However, state-controlled enterprises are not related parties simply because they are all state-controlled.

(IV) A major related-party transaction refers to a transaction between a microfinance company and a related party in which the amount of a single transaction accounts for more than 5% of the company's net assets at the end of the previous quarter, or a transaction between a microfinance company and a related party in which the balance of transactions between the company and the related party accounts for more than 10% of the company's net assets at the end of the previous quarter.

(V) Online loan business refers to the use of technical means such as big data, cloud computing, and mobile Internet, using endogenous data information such as customer operations, online consumption, and online transactions accumulated on the Internet platform, as well as other data information obtained through legal channels, to analyze and assess the credit risks of borrowers, determine the loan method and amount, and complete the entire process of loan application acceptance, risk review, loan approval, loan issuance, and loan recovery online.

(6) Local financial management institutions refer to provincial local financial management institutions and institutions authorized by them at the centrally-administered municipality, prefecture-level city, and county levels that undertake the regulatory functions of microfinance companies.

The term “above” as used in these Measures includes the number itself, while “exceeds” and “less than” do not include the number itself.

Article 65 [Right of Interpretation] The State Financial Regulatory Administration shall be responsible for interpreting these Measures.

Article 66 [Effective Time] This Measures shall come into force on the date of publication, and the "Notice of the Office of the China Banking and Insurance Regulatory Commission on Strengthening the Supervision and Administration of Microfinance Companies" (Yinbaojianbanfa [2020] No. 86) shall be repealed at the same time.