Legal analysis: Small loan companies that meet the establishment conditions are legal. Microfinance companies are limited liability companies or joint stock limited companies established by natural persons, corporate legal persons and other social organizations that do not absorb public deposits and operate microfinance business.

Legal basis: Article 680 of the Civil Code of People's Republic of China (PRC) prohibits high-interest lending, and the lending rate shall not violate the relevant provisions of the state. If there is no agreement on the payment of interest in the loan contract, it shall be deemed that there is no interest. If the payment method of interest is not specified in the loan contract, and the parties cannot reach a supplementary agreement, if the interest is determined according to the local or the parties' trading methods, trading habits, market interest rates and other factors, the loan between natural persons is regarded as interest-free.