The regulatory framework for microfinance in China is still evolving. China Banking Regulatory Commission (“CBRC”) has developed the Village Township Bank (“VTB”) concept, which supports the establishment of microfinance institutions (“MFIs”) with a full banking license, including deposit taking authority, primarily in rural areas and usually limited to a single county. IFC has invested in two VTBs, both in the frontier regions. Today, there are around 100 VTBs in China. CBRC wants now to move the VTB concept one step further by creating around 1,300 new VTBs in the next three years. In this context, six VTB licenses are to be granted in Shenzhen, the first Special Economic Zone established in the early 80s to pilot new economic structures. The granting of the licenses is an explicit effort by CBRC and the Shenzhen government to create momentum for micro, small and medium enterprise (“MSME”) lending which, despite policy efforts and attempts by state-owned banks in this sector, still seriously lags. Today, Shenzhen generates a GDP of approximately US$114 billion or 2.6% of China’s overall GDP and 45% of Guangdong Province’s trade. The basis of this economic powerhouse is MSMEs, which contribute more than 65% of Shenzhen’s economic output and 87% of its employment. Yet, only 36% of MSMEs in Shenzhen have access to bank finance, which equates to an estimated unmet demand of several hundred billion RMB. Moreover, Shenzhen’s labor force is made up of migrant workers from all over China, especially from frontier regions and rural areas. A new VTB in Shenzhen specialized in serving MSMEs in effect will support the job creation for migrant workers from poorer regions of the country, as well as enable remittance flows and skill transfer to benefit their less developed home counties and provinces.