China’s Ministry of Finance said it will set up a special incentive fund to provide 2 billion yuan ($290 million) annually for local authorities to support financial institutions’ financial services to small and micro businesses.

The pilot program will cover 60 cities across the country and last three years, the ministry said. Local governments will be able to access the fund if they meet certain criteria in assessments of their financial support to small companies.

Local authorities can use the fund to compensate financial institutions for loans to small and micro businesses or supplement capital for local financial guarantee institutions.

The program is part of efforts to encourage local authorities to explore effective solutions for improving private sector funding access while effectively controlling risks, the ministry said in a statement jointly issued with the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the Ministry of Science and Technology and the Ministry of Industry and Information Technology.

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