Beginning from this year, ICBC entered aggressively the small enterprises segment backed by the strong base built in the past few years. Growth has been dynamic in the number of small enterprises customers as well as loan balance. As of the end of June, ICBC extended credit to 51000 small enterprises with a jump of 25.
8% since January 2010 to RMB 390.9 billion, 15 percentage points higher than the increase of all ICBC loans to corporate customers. Loan balance to small and mid corporate segment as of end of June was a torrid 2.2 trillion yuan if loans to medium-sized businesses were also counted. Over 50% of ICBC corporate loans were SME (small-and-medium enterprises) loans.
While the loans to small business customers growing at a respectable clip, ICBC was able to maintain its loan quality with a bad loan rate of 1.09% up to end of June, down 0.33 percentage points from the beginning of the year.
An executive with the ICBC said, as a long-term strategy ICBC has been focused on financial services to small enterprises to support their growth. To a large-scale commercial bank as ICBC, this is part of the Bank's social responsibility efforts as it helps the economy and society to move forward and provides job opportunities. It is also an important move for ICBC to adjust its own credit structure, nurture new growth pole and achieve sustainable development.
The ICBC spokesperson continued that ICBC has in place a very clear development plan to grow small corporate segment, requiring higher average growth than in other corporate businesses of the same period every year in the next five years. New loans to small enterprises every year must reach 100 billion yuan or above. This is an overall plan drawing out the hard figures as well as a volume to compare.
After all the tenuous efforts in previous years, loans to small enterprises are now one of the most important lending businesses in ICBC as they can generate higher income and generally carry small amount in one loan. Therefore, extending credit to small enterprises plays a significant role in lessening loan concentration and uplifting capital return rate.
This year, the business gathers momentum. In the first six months ICBC has extended a total of RMB 310.3 billion in loans to small enterprises. At the end of June, balance of loans to small business customers rose RMB 80.1 billion from the beginning of this year, higher than the growth for the whole previous year in just 6 months.
ICBC is accelerating its pace to move into the "blue sea" market of small enterprise loans in view of the high profit contribution.
Opinions says that ICBC as the largest bank in the country to push ahead the loan business in small corporate segment is a move with several advantages achieving "multi-win": address the difficulty of small enterprises of getting funded, support employment, push the structural adjustment of the economy, as well as open a new area of growth for own sustainable development. In the foreseeable future, the effect of this aggressive strategy of ICBC will be significant as the business scale expands. To a bank, this is a stable and sustainable source of income.
One viewpoint reflects that medium-sized and small financial institutions have better competitive advantages in the small business segment. On this ground, large banks also have unique advantages, as related by the ICBC spokesperson. Large banks have a large number of branches, comprehensive financial service network, and strong in identification, control and undertaking of risks.
Worthy of note is that ICBC has been successful in finding an effective business model after years of experience and innovation. To address the funding issue of the small enterprises and support their growth, not only the strategy, ICBC also has mechanisms and products.
In putting in place the mechanism for small business loans, ICBC has an extensive network of 1217 special outlets for small business customers. In terms of management, the team of 29000 staffs dedicated to attracting small businesses is separated from the team selling to large corporate accounts and projects.
When compared to serving large corporate accounts and projects, selling loan service to small accounts has a wide range to cover and entails higher cost and risk. In light of this, ICBC assesses the staff performance in total sales, revenue generation and the quality of service in the whole process.
Staffs are motivated by the higher salary because of good performance.
Loans to small enterprises are usually in small amount, of short tenor, of large numbers, at different times and high management cost. In view of this, ICBC institutes measures in credit rating and granting on the small business customers. The objective is to achieve balance between business development and risk control.
In investigating and approval of loans, financial reports and collaterals are not the only source in credit rating and granting. Instead, judging matrix is based on "three items" (collateral/pledge, personal character, product) and "three forms" (water, electricity, tax) to control risk and enhance efficiency.
As small enterprises generally cannot produce qualified collateral, ICBC offers many guarantee options in place of the conventional. Examples: use of account receivables generated in actual transactions as the pledge based on the creditability of the counterparty; commodity traded is pledged as chattel; guarantee offered by professional guarantee companies or legal representative; mutual guarantee or joint guarantee between the small business customers.
In product innovation, ICBC has a full range of offerings to meet the needs of the small enterprises. Loans to small corporate segment are very similar to retail banking services. Through synergy effect, loan products for small business customers are standardized as much as possible to reduce cost and increase return.
ICBC moves aggressively the trade finance service to small enterprises in the upstream and downstream industry chain of large enterprises and projects. Up to end of July, balance of trade finance to small enterprises reaches RMB 90.6 billion, accounting for 22.7% of small enterprise loans. "Revolving Loan for small business", "Business-type Property Loan for small business", "Equipment Mortgage Loan for small business" are among the tens of standard loan products for small business segment to cater for the differential needs of the small enterprises and drive the growth of the business.
"Online Loan Link", a kind of online loan for small enterprises, is an innovation of combining product and channel leveraging on the strong Internet Banking system. The new product is warmly received by the small business customers since launched. Unlike the conventional option, it breaks the barrier of time and space.
Small business customers are able to finish the whole process of loan application, approval, drawdown and repayment without running to the bank within banking hours as in the past. Up to end of July this year, ICBC's loan balance in "Online Loan Link" reaches RMB 42.6 billion, an increase of RMB 38.
3 billon from the beginning of the year. "Online Loan Link" is now a flagship product of ICBC to serve the small enterprises.
At the moment, small enterprises in the country are in the critical period of industry upgrade and update loan demand is huge, a "blue sea" market for ICBC loan business to small enterprises as the business matured after years of progress. Looking ahead the future scenario of the business has huge potential. In the coming period, ICBC will increase efforts to push ahead this segment, driving the national economy as well as bringing about a new force for the high and sustainable profitability growth.
