Two weeks after Premier Zhu Rongji urged banks to lend more to small and medium-sized firms, Shanghai is working out a programme to help such enterprises, seen as the white knights for the rising ranks of the unemployed. The People's Bank of China (Shanghai) is to carry out a survey of firms to evaluate the extent of their financial difficulties and measures to help overcome them. 'This is in response to Mr Zhu's call to extend a lending hand to small and medium-sized enterprises,' a PBOC Shanghai official said. Like their counterparts elsewhere, smaller firms generally find it hard to convince banks to lend them money, even if their business is thriving. Because of their very nature, they are often unable to put up the collateral demanded by banks. As an experiment, local governments in Changning, Huangpu and Yangpu districts have set up credit guarantee funds to service small businesses. Shanghai's move comes as state banks pledge to step up support for small and medium-sized enterprises in the light of Mr Zhu's call. China Daily Business Weekly reported over the weekend that Bank of China and Industrial and Commercial Bank of China (ICBC) were exploring setting up credit departments for small businesses. ICBC credit official Lian Gong said: 'We are likely to become the first bank to open such a business sector.' Small and medium-sized businesses account for 99 per cent of the country's enterprises, 60 per cent of industrial output and 80 per cent of new jobs created each year, but only 38 per cent of the loans extended by state-owned banks go to them. Long neglected by Beijing, small and medium-sized firms are finally in the limelight because they continue to create jobs as employment in state enterprises shrinks rapidly. They can absorb some people laid off by the inefficient state sector, helping to defuse a build-up of a potentially explosive situation as well as adding to economic growth. Besides, banks sitting on mountains of deposits will be able to channel part of the funds to new customers. 'These days, banks dare not lend to many state enterprises for fear of not getting their money back,' an official with a state bank said. 'Now, if they have credit departments for small firms, they can assess which are the efficient and profitable ones they can lend money to.'