YiWu in Zhejiang is a renowned city of small merchandize in China. Over 300,000 kinds of goods are circulated there. It has a thriving economy of private and individual enterprises, which is highly export-oriented. There are more than 8000 permanent foreign residents and nearly 600 foreign-invested companies in Yiwu.
Zhejiang Jinxiu Laces Co. Ltd., a company in Yiwu, was founded in 1997 and undergone scale expansion in 2003. Sales of this company in 2005 already exceeded RMB 200 million. 95% of its textile products were exported to Africa and Europe. Mr. Jin Weidong, General Manager of Zhejiang Yiwu Jinxiu Laces Co. Ltd., stated that the success of the company owed greatly to the credit facilities and financial services provided by local ICBC branch.
In 2005, Yiwu Sub-Branch of ICBC offered the company a loan of RMB 35 million to buy the world-leading embroidery machine from Switzerland. From then, Company's production capacity and product quality were drastically improved. There are a few hundred small enterprises like Zhejiang Yiwu Jinxiu Laces Co. Ltd., in Yiwu, which developed based on financial support from ICBC.
Currently, there were altogether 21417 small enterprises in China received loans from ICBC.
In recent years, ICBC has actively involved in innovation activities, put tremendous attention in offering credit services to small enterprises for development and obtain encouraging results. According to internal statistics until March 31, 2006, ICBC loan balances for small enterprises (exclude discounting) broke over RMB 100 billion and reached RMB 102.3 billion. The rate of non-performing loan was lower than the average level of all types of loans in the whole ICBC. With a good quality of loans, small enterprises became a new source of profit growth of ICBC.
ICBC Person in charge from related department introduced that growth of ICBC loans for small enterprises was evidently gathering speed in 2005. According to internal statistics ICBC cumulatively released RMB 107.8 billion of loans (exclude discounting) to small enterprises in that year. The loan balances at the end of that year showed a net increase of RMB 35 billion, 70% higher compared to that at the beginning of the year, occupying over 30% of loan increments in all corporate customers.
ICBC already cumulatively released RMB 46.3 billion of loans (exclude discounting) to small enterprises in the first three months of 2006, with a net increase of RMB 19 billion in loan balance. The credit business to small enterprises was vibrant and booming, according to internal statistics.
This ICBC Person in charge stated the reason behind ICBC success in grasping the opportunities in such a challenging business of lending to small enterprises. First, ICBC treated all small enterprises equally based on operating principles of National Credit Policy and of commercial bank offering credit facilities.
When choosing customers of small enterprises, ICBC took particular emphasis on those who produce quality products, involve very high technology, be competitive and have good development prospect. Loans were strictly prohibited to companies that do not comply with National Industrial Policy and Industry Development Plan.
Moreover, ICBC established a differential regional credit policy framework to steadily push for a graded development strategy. ICBC classified all subordinated Tier-2 Branches into 4 levels according to availability of credit resources for small enterprises in different regions and different credit management levels of sub-branches.
Authorization in releasing loans to small enterprises and standards of becoming customer are allowed to be treated differently, in order to encourage level 1 and level 2 Branches to speed up lending to small enterprises. In 2005, ICBC designated 12 Branches as the main branches to develop credit service for small enterprises.
Regional credit policy was timely revised. By the end of March 2006, loans to small enterprises from these 12 Branches has accounted for over 90% in the whole bank.
This ICBC person in charge also stated that ICBC was the first in China financial system to single out loans and services to "small enterprises" as an independent business category to operate and assess. This innovative move gained approval from institutions such as Peoples' Bank of China and China Banking Regulatory Commission.
Among the four State-owned and State shareholding commercial banks, ICBC become the only Liaison Bank for Credit to Small Enterprises approved by China Banking Regulatory Commission. Based on this, ICBC fully consider practical problems such as incomplete financial system of small enterprises, asymmetric information between bank and enterprise.
A new rating and credit management scheme for small enterprises was drafted after filtering indexes that can reflect their characteristics and their financing risks from a wealth of risk factors. ICBC also re-designed the business flow of lending to small enterprises and explored new business management system and risk prevention measures in order to build a new model of business development and service marketing.
Meanwhile, with a market-oriented approach, ICBC improved its financial services to small enterprises by implementing various measures to satisfy financial needs of small enterprises. First, procession flow of credit approval was optimized to cater for small, frequent and urgent loans required by small enterprises.
Credit authorization was much suited to market demands, and was more efficient. Response to market was faster. Second, new banking products were launched continuously to satisfy various financing needs of small enterprises. At present, ICBC can offer small enterprises loans such as working capital loan, revolving loan, account overdraft loan, package loan and factoring services, as well as on- and off-balance sheet banking products such as bank acceptance draft, letter of credit, international trade finance, bills discount and letter of guarantee.
These products should basically fulfill the production and operation needs of small enterprises. For instances, in order to overcome the hurdle of "difficulty on guarantees" encountered by small enterprises, ICBC made great efforts to innovate guarantee method and successively offered loans with a pledge loan of storage, funds at shop, or property of natural person, and also actively cooperate with medium and small Credit Guarantee Organizations to provide small enterprises loans with guarantee of professional guarantee companies to meet their financing needs.
Third, taking advantages of its electronic network and professional staff, ICBC help small enterprises to apply for electronic banking service and offer cash management services to improve their management, lower their cost and enhance their efficiency.
While promoting credit service to small enterprises, ICBC placed heavy importance in averting risk. A series of risk management policies and regulations were put in practice. In line with the characteristics of small enterprise, ICBC set upper limits for small enterprises on financing volume and financing term for one single loan in order to let the loan operation scale and life cycle corresponding to each other.
ICBC strengthen the management of loan guarantee by specifying acceptable guarantee methods for different branches subsidiaries respectively such that they can adapt to local credit circumstance. Repayment by installment was actively promoted. ICBC also strengthen Branches' risk management when lending to small enterprises.
Penalty was given to branches whose non-performing loans to small enterprises exceed the risk control line to effectively control total risk. Further, ICBC took advantages of information technology to develop a sub-system for small enterprises credit service based on its existing credit management system (CM2002) platform.
Whole flow of this credit management sub-system was fully computerized and under the stiffness control of policy system. While improving the operation management efficiency, above measures ensured that bank offices implement all management regulations designated by Head Office fully and completely. The ability to control credit risk of small enterprises was also greatly enhanced.
