Over the last few years ICBC has moved aggressively on the delivery of financial services to small businesses, especially in lending. The bank focuses on serving small entities and supports their growth. ICBC combines small business lending with its structural reorientation of the business operation to achieve win-win, social and economic benefits.
ICBC chalked up historic high in loan balance to small businesses with a surge of RMB 126 billion from the beginning of 2010 to RMB 436.8 billion at the end of October, representing an increase of more than RMB 100 billion in the year for the first time. The rise was 24 percentage points higher than the average increase of ICBC's corporate loans of the same period.
ICBC reinforces its dominance as the No. 1 bank in lending to small enterprises in the country. Meanwhile, worthy of note is the ICBC's risk control on the small business loans. Up to end of October, the non-performing rate of extending credit to small enterprises was kept at a good level of 0.9%. Besides the loan service to the small corporate segment, ICBC also offers services in settlement, electronic banking, cash management, investment banking, bank card and others in a bid to improve the standard of financial services to small enterprises.
As the business matured after years of progress, there is a huge potential to tap into small business lending market, said an executive with ICBC. In the days ahead, ICBC will push ahead the business to a greater scale and commercial sustainability. During the "Twelfth Five-Year" period, ICBC plans to extend credit to small businesses at an annual growth of about RMB 140 billion.
By 2015, it is expected that ICBC small business loans will reach around RMB 1100 billion, and approximately 140,000 small enterprises will receive ICBC loans. This is a strong force to improve the economic structure while at the same time helping ICBC achieve continuous and high growth.
A Revised Strategy to Loom Large the Financial Services to Small Businesses
ICBC remains committed to serving the small enterprises as one strategic business, To a large-scale commercial bank as ICBC, not only is this part of the social responsibility effort to help drive the economy and society and provide job opportunities, but a mandatory choice for ICBC to lend to target recipients in appropriate loan tenor, reduce credit concentration risk and enhance sustainable development.
By following the business philosophy of "serving big and small businesses" and the "Six Mechanisms", "Three Independent Moves" laid down by the regulatory departments, ICBC steps away from the "Dare not continue, Do not wish to continue, don't know how to continue" situation and moves aggressively to win the small enterprises.
In an effort to help grass-root organizations serve and win small enterprises, ICBC starts a marketing program to sell to different levels of customers. Appraisal is one measure taken to assist the sub-branches and outlets to focus on the SME (small and medium enterprises) and personal banking services.
All ICBC grass-root organizations conduct careful study on the market and funding needs of the small enterprises in the area. They concentrate their efforts, dedicate to serve small businesses, "serving small enterprises is our business", win more customers, get more business and achieve great result.
After many years of continual efforts, a large number of ICBC grass-root organizations have created a solid base in terms of the number of small business customers and the loans extended. Many tier-2 branches score good performance of "over 10 billion", "over 5 billion" in loans to small businesses.
The business for small enterprises has brought substantial consolidated income to the local branches. ICBC grass-root organizations now understand the business is "bread and butter", but more, "fill the stomach" and "eat very good".
ICBC changes the conventional philosophy in business management while moving forward to serve small enterprises. I. The set-up of "operating" risk approach. ICBC stresses to cover risk cost by earnings, not to avoid risk, not going for zero risk. II. Change the former practices of relying on the credibility of the customers.
Instead, take the credibility of the small enterprise's counterparty or the creditability of the merchandize. Avoid the lending risk by taking special concern on the cash flow and logistic flow of the small enterprises. III. Change the conventional marketing approach and focus on the upstream/downstream of the key enterprises, industry groups and the small enterprises in professional markets.
Win customers in "batch", target at the right customers.
Optimization to Create First-Class Platform for Serving Small Enterprises
In 2009, ICBC set up a special "Small Business Banking Department' in the Head Office to be responsible for the promotion of the business as well as risk management, product innovation management, and the building of a team of customer managers. All tier-1 branches established respective small business banking departments. This forms an initial management framework for ICBC to start the business.
In 2009, ICBC started to set up special outlets serving small enterprises to cater for the increasing number of customers as well as loan balance. All the special outlets are equipped with a team of customer managers to concentrate and expand the business. Sub-branches engaged in serving small enterprises are not allowed to extend loans to large-and-medium companies.
The business processes, operation model, appraisal measures in these special outlets are standardized. As of today, ICBC offers professional, all-functional and "one-stop" services to small enterprises through a dedicated network of 264 sub-branches and 953 sub-centers covering all the main areas.
ICBC develops program to train up the staff to provide professional, high quality services to small enterprises, including examination and certification before on the job. In 2009, 35,000 staffs (in terms of person-times) have participated in the on-the-job certification examination organized by the Head Office. Around 29,000 staffs were qualified. A professional team was basically set up to deliver best-quality services to the small enterprises.
Attempts to Set up Comprehensive Scheme for Extending Loans to Small Enterprises
The small business owners from coast to coast complain of "huge hurdles to getting badly needed loans". ICBC has engaged in the incessant efforts and innovation and made an initial attempt to search for a solution with ICBC characteristics. From ICBC practices, despite the relatively "high risk' in extending credit to small business, the risk can be controlled under reasonable rules and proper policy. Good progress can also be achieved.
At the initial stage of the business, ICBC set up a comprehensive and independent credit rating and granting system for small enterprises based on their situations and funding needs. In recent two years, ICBC incorporated the judging indexes of "three items" (collateral/pledge, personal character, product) and "three forms" (water, electricity, tax) into related rules.
The solution addresses various salient issues, the high threshold for small enterprises to get bank loans, the insufficient line of credit to small enterprises, as well as meeting the market demand and risk management requirements.
In order to "respond" quickly to the customer needs, ICBC continues to look for solution from actual practices. Optimization for small business lending entails three updates carried out in 2006, 2007 and 2010 on the business process. When releasing loans to small enterprises, two staffs perform the investigation and go through a standard, highly efficient "4-in-1" process credit rating, credit granting, assessment on the pledge/collateral and credit approval.
ICBC also makes use of its technological strength to incorporate into the IT system the online version of "4-in-1" process and system rigid control. This greatly enhances the efficiency in the operation and management of the business.
ICBC announces special credit policy to meet the reasonable funding needs from small enterprises during their transition period when expanding into mid-sized companies. This involves policy on credit granting, loan amount and tenor, interest rate. The goal is to implement differential management on the small and mid-sized enterprises of different scales and support the growth of high-quality small enterprises.
In extending loans to small enterprises in different regions, ICBC announces regional and differential lending policy in line with the local situation, focusing on the credit line, category, and authorization for one loan. At present, all subsidiaries of ICBC offer the services to small enterprises.
Innovation to Enrich the Offering of Financial Products to Small Enterprises
Financial products are the bridges between small enterprises and banks. ICBC caters to small business clients with innovative products and services to meet their funding needs. Loan category has been expanded, from one category (short-term working capital loan) in the early period to a diversified range encompassing mid-term working capital loan, trade finance, loan for business property and revolving loan.
Small businesses are "difficult to get guarantee" for the loans. To address the issue, ICBC launches a range of trade finance services (order financing, invoice financing, commodity financing, factoring) to the small enterprises in the upstream/downstream of the industry "chain", backed by its own vast customer base of large companies, large projects.
The result is encouraging. As of the end of October, 2010, ICBC's balance of trade facility to small enterprises reached RMB 102.4 billion, representing a jump of RMB 44.8 billion from the beginning of the year and 36% increase of small business loans in the same period. Further, ICBC also assists to the subsidiaries to tailor-make proposals for the local small enterprises (group customers) in different professional markets, industry groups.
Various measures have been taken such as credit enhancement by third party, guarantee from third party, joint guarantee between small enterprises and portfolio guarantee. Over 40 personalized proposals have been compiled since 2009. "Loan to Xiashan aquatic products" in Guangdong's Zhanjiang is an example.
ICBC solutions help many small enterprises (group customers) solve the problem of "nowhere to get loan" and serve as a good reference.
"Online Loan Link" is an innovative product of ICBC launched in 2010 for small enterprises, who can now apply, draw or repay loans online. The product carries many features: committed credit granting, loan amount credited into account in real-time. This is a solution for small enterprises to obtain financing "in a short time, in a frequent and quick".
The product has gain favorable recognition from the customers since its launch. Customer experience shows that "Online Loan Link" allows ample time for small businesses to arrange their production and management schedule, avoid the funding risk due to the uncertainty of the loan. Customers warmly welcome the product.
Meanwhile, the "Online Loan Link" also relieves the workload of ICBC staffs, who now have time to serve more small enterprises and sustain the growth of the business. The product also wins the recognitions from grass-root organizations and customer managers. At the end of October, ICBC's "Online Loan Link" balance surged RMB 63.
8 billion from the beginning of the year, accounting for 51% increase of small business loans in the same period. In the next step, ICBC is considering to develop loan products for online merchants and e-supply chain financing products in order to expand the range of financial services to small enterprises.
Strengthened Management to Control Risk
ICBC strictly follows the principle of "green credit" to control the risk in small business lending and maintain the momentum of the business. Loans to small businesses must align with the national industry policy and ICBC's lending policy for different industry sectors. ICBC has a strict policy of "a veto with only one vote" to reject any application from enterprises that fail to meet the eco standards.
ICBC is not lending to the "five types of small enterprises" (small iron smelting company, small coke-making company, small chemical fertilizer company, small paper-making company, small coal mine) and small businesses of "high energy-consumption, high emission, resource-exhaustive".
When handling the application from small enterprises, ICBC adheres to the principle of "investigated by two staffs", "verified by two staffs", "signed by two staffs". All customer managers are required to "hand over management" in regular period. The purpose is to stop moral risk. ICBC also launches the service of loan repayment by installment so that small enterprises can match their loans with cash flow. The service also helps expose the risk in a timely fashion.
ICBC implements the management on the customer flow in order to stop any forthcoming credit risk. Every year ICBC analyzes the production, management and development prospect of the small enterprises and stops any lending to those with potential risks. The aim is to maintain a base of good small business customer groups.
