CHENGDU - Small pickle producers in China's largest pickle producing province are benefiting from what they call a "pickle bank," which offers pickle companies a lifeline: collateral-free credit.

The bank, a branch of the Leshan Commercial Bank, was established last August in Meishan, a major pickle production base in Southwest China's Sichuan province. It offers loans to micro- and small pickle enterprises that otherwise would have trouble obtaining bank loans.

Hu Mingqian, owner of a local pickle producer, used to find it hard getting bank loans and had to turn to private lenders despite higher interest rates.

"Back then, we had few valuable assets but pickle jars to pledge, and banks wouldn't take them as collateral. Besides, their loan approval process was slow," he said.

Last August, Hu's firm received a credit guarantee valued at 1.5 million yuan ($238,000) from the "pickle bank." The bank required three other MSEs to cosign the loan in order to reduce the risk of default.

Hu Mingqian used the money to buy 2,000 tons of mustard plants to make Sichuan pickles. The firm's pickle sales for 2011 hit 30 million yuan, with a net profit of 3.2 million yuan.

In the seasonal pickle industry, cash flow is tightest when vegetables are purchased for pickle production. But because of the rigid process of evaluating micro- and small borrowers' collateral, banks usually have difficulty meeting the seasonal demand for loans, said Wen Weihu, an official with the Sichuan Provincial Banking Regulatory Bureau.

"Lack of fixed assets as collateral makes it hard for the micro- and small enterprises (MSEs) to get bank loans," he said.

In order to limit the risk of bad loans, the "pickle bank" uses the Meishan Food Association to help evaluate the creditworthiness of MSEs. One role of the association is to make sure firms in the industry meet official production standards, otherwise they can't legally operate. So the association is familiar with the pickle companies.

"We know each local pickle producer very well, such as their business structure, credit history and cash flow. Thus, we give credit guarantees to those with good business prospects," said Liao Xinrong, head of the association.

Liao also said prospective borrowers must find other MSEs to share the loan. In this way, the risk becomes manageable even without collateral.

Gou Limei, head of the "pickle bank," said the bank has lent a total of 60 million yuan to 28 pickle MSEs over the past few months. No bad loans have been reported so far.

"Our bank also has cooperation with the local fruit association, vegetable cooperative and even peasants. In addition to offering loans, we have also revamped the entire pickle production chain," Gou said.

Nowadays Sichuan pickles are exported to more than 20 countries and regions, including the United States, Canada and Japan. Last year Meishan alone produced over a million tons of pickles, valued at more than 6 billion yuan, according to government statistics.