— An exclusive interview of the People's Daily Online with Lin Huan, General Manager Assistant of the Small-sized Enterprises Department of Industrial Bank
Date: June 29, 2012 Source: People's Daily Online
Time: 15:40–16:10, June 29
Place: Studio of the People's Daily Online
Guest: Lin Huan, Industrial Bank
Theme: On Financial Support for the Development of Small- and Mini-sized Enterprises
[Host]: Hello, everyone. Welcome to watch the video interview of the Business Channel of the People's Daily Online. Today, our interview will continue discussing the financial support to small- and mini-sized enterprises with you . Today, our guest in the studio is Lin Huan, GM Assistant of the Small-sized Enterprises Department of Industrial Bank (IB). Mr. Lin, Welcome.
[Host]: Mr. Lin, welcome. Thank you for coming here despite a long distance. In your CV, I see that you have worked in the banking industry for more than 20 years, and you have stayed in the Agricultural Bank of China (ABC) and the China Merchants Bank (CMB). I'm wondering that when you came to IB. Why did you choose IB as the land to take root and develop finally?
[Lin Huan]: I should say that what attract ed me is the culture of IB and the spirit of our IB people–we defy difficulties and obstacles and strive for successes by seizing the day and seizing the hour. Therefore, I chose IB with the hope of realizing my value of life through making strenuous efforts in the market.
[Host]: In your opinion, what attracts you most in IB?
[Lin Huan]: I should say that IB has a team spirit. All people here are in a simple HR relationship and everyone exert himself or herself to develop the undertaking of the bank. Hence, I think that it is also a very important aspect attracting me.
[Host]: I'm wondering whether you have any worry in answering these questions. We always say that IB provides a large variety of services, but in fact, we don't mean that such services are not available in other banks. According to your accent, are you a native of Fujian ?
[Lin Huan]: Yes.
[Host]: That is to say you come back to your hometown. Is the Head Office of IB located in Xiamen ?
[Lin Huan]: Our Head Office is in Fuzhou. You just talk to the point. IB also has a homeland culture, which attracts me very much because everyone gets along well with each other and help each other, and it can encourage all to make concerted efforts for achieving success. So I'm also attracted by such homeland culture.
[Host]: With these digressions, we see that you are one loving your hometown very much and you attach great importance to the corporate team culture. My first question is about the current number, loan balance and district distribution of small-sized enterprise customers of IB. Can you introduce the specific situation to our friends in front of computers?
[Lin Huan]: Ok. I'd like to say hello to these friends first. Hello everyone. I'm Lin Huan from the Small-sized Enterprises Department of IB Head Office. I'm very glad to have such an opportunity to exchange some of our practices and suggestions on financial services to small- and mini-sized enterprises with everyone online through the powerful network platform of the People's Daily Online.
[Host]: Maybe some will become your old friends after today's communication. Later, our friends will discuss some topics with you on the internet, and quite a number will be from Fuzhou. First, please introduce the loan balance and distribution of IB in this year to us.
[Lin Huan]: I have the latest data here. Because we are a listed company, we should abide by relevant regulations regarding information disclosure. Hence, all the data I cite here are statistics by the end of March. The credit-granted small- and mini-sized enterprise customers (in line with the national standard) of our bank have exceeded 9,300 by the end of March, with the balance of loans both in home and foreign currencies totaling RMB 204.5 billion. The entire business accounts for nearly 30% of our corporate business loans. In fact, these data do not cover those personal business loans that we have extended to individual business owners. If we place the two together, our loans to small- and mini-sized enterprises have actually exceeded RMB 260 billion, becoming a very important business sector among all our businesses.
[Lin Huan]: In terms of district distribution, our credit extension to small- and mini-sized enterprises is basically concentrated in those areas with relatively developed economy and clustered small- and mini-sized enterprises such as Fujian, Zhejiang, Shanghai, Guangdong, and Jiangsu. Among them, Fujian attracts the largest proportion because it is our hometown and base.
[Host]: You know better about the situation.
[Lin Huan]: I should say that we know better about the landscape, people and enterprises. In terms of either sentiment or the depth of business roots, we extend more loans in the province.
[Lin Huan]: In this aspect, we have a balance of loan up to RMB 44 billion to small- and mini-sized enterprises in Fujian. The second largest area is Zhejiang, where we have extended nearly RMB 25 billion. Basically, we have also extended over RMB 10 billion loans respectively in Shanghai, Guangdong, Jiangsu and Beijing. Apart from these key areas, however, we have also established the small-sized enterprises departments in our 37 branches across China to provide professional services to small- and mini-sized enterprises with our over 6,000 customer managers across the bank.
[Host]: At present, except the areas in Southeast China that you have mentioned just now, including Fujian, Zhejiang, Shanghai, and Guangdong, how has IB performed in businesses regarding the small- and mini-sized enterprises in Central China and West China?
[Lin Huan]: We also have good performances in those areas. Take Wuhan Branch as an example, in the aspect of ex pan sion of small- and mini-sized enterprises, the branch has, relying on government procurement loans, driven services to the clusters of small- and mini-sized enterprises both upstream and downstream. Moreover, in Tianjin we have won a number of awards presented by the local government and made considerable contribution to the development of local small- and mini-sized enterprises.
[Host]: Are the entire strategy or conception for businesses regarding small- and mini-sized enterprises in Fujian, Jiangsu and Shanghai different from that in these areas.
[Lin Huan]: Yes. There are some differences. Nonetheless, I should say that our overall criteria for selecting customers are basically the same.
[Host]: That is to say, the admittance threshold is the same.
[Lin Huan]: Yes. But certainly, we have different emphases. The reason is that we will give priority to developing the characteristic industries in each area and areas with distinctive features according to the different advantages in economy, hotspot and customer group in different regions.
[Host]: Each bank should adopt different measures according to the local conditions of different areas. At present, what expectation s and objective s have IB accomplished ?
[Lin Huan]: In recent years, our bank has actively implemented a range of policies and guidelines of the Central Government for supporting the development of small- and mini-sized enterprises, perform ed the social responsibility as a commercial bank, and push ed forward the development of financial services to small- and mini-sized enterprises. To IB, it's not an image project nor a political task, but an important direction for our strategic transformation. In addition, the numerous customer groups of small- and mini-sized enterprises also serve as the basis for the sustainable development of our corporate finance. Upon this bas is, we have firm confidence in driving the development of small- and mini-sized enterprises and we have always been doing so.
[Lin Huan]: On the other side, this year, we have put emphasis on furthering our service efforts to push the development and growth of small- and mini-sized enterprises in such aspects as innovation in marketing model, increasing resource configuration, and simplifying review process.
[Host]: IB is in the process of transformation now, as you have mentioned just now. In the opinion of common people, all things first come into existence, and then develop to maturity. Now, all banks across the country are possibly facing the period of transformation, which may require a long time. There would be many characteristic products and businesses along with the transformation period, just like what you have mentioned. It is reported that IB boast ed a large number of distinctive products and it can rank among the top three. Could you introduce to us that which characteristic products are for our small- and mini-sized enterprises?
[Lin Huan]: OK. I should say product innovation is always a breakthrough point for our business services to small- and mini-sized enterprises. Our bank is committed to establishing our product brand by improving the adaptability and pertinence of small-sized enterprise products. Up to now, we have basically established a system, forming a distinctive product family with “IB Sesame Blooming–SME IPO Program” as the leading product and “IB enhancement loan” and “IB Point-based Loan” as innovative products. The family consists of four major types of basic products. The first type is of guarantee-based businesses. With such businesses, we stress on the breakthrough in guaranteeing method so as to provide small- and mini-sized enterprise customers with financial services with more flexible criteria for guarantees and pledges as well as risk mitigation methods. Here, I'd like to emphasize that there are many products in the type, including our joint loan and joint guarantee, self-constructed building factory mortgage loan, and equipment loan. In particular, “IB enhancement loan” is a type of credit enhancement service that we provide particularly to small- and mini-sized enterprises considering that some of them may not have sufficient guarantee. Based on the business cooperation between some small- and mini-sized enterprises and IB, we will give such enterprises some credit enhancement with a view to activating the intangible assets of these enterprises such as trademark right and intellectual property, or some assets that cannot be pledged, like some shares of non-listed companies. We can take all the abovementioned assets as factors for credit enhancement. There is also another important aspect. If you have real transaction background, we can take your orders and trading contracts as the enhancement factors so as to improve mortgage and pledge ratio of core assets, which can be enhanced to 147%. Therefore, we should say that the financing cost of customers is reduced effectively and the problem of guarantee is solved.
[Lin Huan]: The second type is of process-simplified businesses. For instance, our fast loan allows the simultaneous proceeding of credit extension investigation and examination, thus effectively shortening the process. The right of examination is given to the financial institution, hence improving the efficiency in an effective way.
[Lin Huan]: The third type is of settlement management products. Here, I'd like to mention “IB Point-based Loan”, which can meet the instantaneous and sudden fund needs of our credit-granted small- and mini-sized enterprise customers. Based on their rewarded points in and business cooperation with our bank, we can define credit lines for such customers directly. The more the cooperation with our bank and the higher the settlement frequency, the higher the line you may get for temporary fund support.
[Lin Huan]: The fourth type is of our leading product, namely “IB Sesame Blooming”–SME IPO Program, which is a response measure that we take against the present challenge for the transformation of commercial banks. With the program, we exert ourselves to push the sustainable development of financial services to small- and mini-sized enterprises by exploring business innovation, and this is one of our important directions. As the target ed customer group is basically outstanding growing SMEs, the program can integrate our investment banking and conventional banking products. That is to say, it can make a flexible setup considering the financing demands of enterprises in the capital market and indirect financing market.
[Host]: Just now, you have mentioned many characteristic services and products of IB. We all know that, if we want to see whether a bank has any innovation, we should also check whether it has any innovative businesses in addition to services and products. As far as the current situation of IB is concerned, does the bank have any special innovative businesses which can respond to the demands of small- and mini-sized enterprises in southeast region which require great investment at present ? Which businesses does IB provide considering their specific situations?
[Lin Huan]: I should say that with our exploration in recent years, namely, the effective integration of direct financing and indirect financing, we have provide d powerful fund support for the growth and prosperity of small-sized enterprises. Therefore, in this perspective, we still continue exerting our efforts in developing the business of “IB Sesame Blooming ” so as to push it to further and deeper level. On one hand, we consider launching cooperation with outstanding securities traders and large commercial institutions to improve the creation of the connotation of its product value. For instance, now we are constructing the IPO piloting plan. According to the operation of enterprises, we can design a top structure for IPO, and with our supporting commercial service model and credit-extending products, we can provide assistance for their IPOs. In fact, we are committed to building a financial workshop for the IPO s of SMEs.
[Host]: When mentioning IPO, SMEs have passed the period seeking development opportunities as small- and mini-sized enterprises, and have grow n stronger. In these years, has IB had the following statistics about the development of small- and mini-sized enterprises? A small- or mini-sized enterprise yesterday may become a large or medium listed company in the future, and after you lend support to help it become a listed company with great strength, it is still a loyal customer of IB. Have you made comparison over such statistics?
[Lin Huan]: Yes, we have special ly recorded statistics in this aspect. For instance, the customers under the support of the “IB Sesame Blooming–SME IPO Program” reach 3,000 now, with the balance of loan approaching RMB 50 billion. The customers covered in the program are also of high quality. Of them, 72 enterprises have launched their IPOs successfully, and 182 are entering the IPO procedure. Meanwhile, 66 enterprises have issued private placement debts successfully, and 172 have introduced risk funds or private placement funds. They are loyal customer groups of ours.
[Host]: Based on your introduction, it's imaginable that many small- and mini-sized enterprises today are the large customers of IB tomorrow. I'm wondering whether IB will organize special observation when deciding to granting loans or carrying out risk evaluation. For instance, how does IB judge whether an enterprise will have a good prospect, or if it has a fixed profit model or income model? Does IB have any consideration of its own in making risk evaluation and lending support to small- and mini-sized enterprises?
[Lin Huan]: With our exploration for a long period, now we have formed two strategies. The first one is the strategy of service growth. While paying attention to the evolution of growing SMEs, we will lend credit support at an appropriate time, helping them to enlarge their scales, build brand, reduce cost, and increase returns. By providing integrated services, we assist them to grow bigger and stronger. On the other hand, we implement the strategy of main issuing bank. We establish in-depth cooperation with customers, and build our bank into a partner with business flow and fund flow coinciding with theirs to the largest extent through cooperation regarding credit extension and settlement businesses. In this way, we can deepen the bank-enterprise cooperation. With the two strategies, we fully showcase the cultural concept of common growth during development that our bank has always promoted.
[Host]: Indeed, many banks take into consideration the common growth during development in a strategic sense. In the long run, this is a very important link. At the very beginning of your introduction, you gave special stress on sentiment twice. This reminds us that, as for insiders engaging in banking, it is hard to combine the ice-cold figures with warm emotions. I'm wondering whether you, with your involvement in the banking industry for so many years, think that IB, in its current development, has encountered some difficulties or intractable problems in businesses regarding small- and mini-sized enterprises.
[Lin Huan]: We can analyze it from two layers. First, it's the corporate layer. Enterprises will have some problems such as asymmetric information, nonstandard and inauthentic financial statement, and the lack of corporate credit rating system and qualified loan guarantee. At the banking layer, the financial service to small- and mini-sized enterprises is labor intensive. That is to say, there are a large number of customers, but the single transaction amount is small, whereas the work load is great. This area requires inputting of a lot of human resources and a great deal of energy, so the cost is very high. Meanwhile, the deposits and loans are not matching. In this area, we need to exert ourselves to consider extending fund sources so as to solve relevant problems.
[Lin Huan]: Moreover, in our actual work, we also encounter some problems regarding small- and mini-sized enterprises, for instance, their poor living capability, weak awareness of credit, and relatively high non-performing ratio. In the aspect of risk prevention, therefore, objectively speaking, a commercial bank should be very prudent in handling credit extension to small- and mini-sized enterprises.
[Host]: Just now, you have analyzed some difficulties encountered by small- and mini-sized enterprises in applying for bank loans in the perspective of IB, such as their relatively weak resistance to risks. In addition, the work should be done repetitively, so it is quite fussy. We won't discuss about methods to solve such problems now. What I want to ask is, in your perspective, how do you think about these problems encountered by small- and mini-sized enterprises which account for a considerable proportion in the total economic volume of China? In your opinion, what difficulties may be encountered ? H ow difficult it will be? And how will banks or other institutions work out solutions?
[Lin Huan]: For small- and mini-sized enterprises, the first issue shall be their development planning. Because, at the early growing period of small- and mini-sized enterprises, they may lack experience in corporate management and design for future growth, we have our considerations in this aspect. By carrying out some cooperation with institutions engaging in capital business cooperation, we can help them to establish a relatively standard operation system from the early period so as to boost them to become bigger and stronger.
[Host]: It seems that some small- and mini-sized enterprises are in lack of money, but what should be solved urgently for some others may not be related to funds, but some internal problems regarding management and structure. Therefore, maybe for a bank, you can make analysis as an expert engaging in the banking industry, and you may give many new ideas to these small- and mini-sized enterprises. Money cannot solve all problems. In your opinion, considering current situation, do we need some new boosts or factors to handle various difficulties and problems, so as to work out solutions?
[Lin Huan]: Yes. We have also been talking about the issue in our bank and I can exchange our ideas with all. We may push forward the construction of service environment for small- and mini-sized enterprises in the whole society from four perspectives. First, we also advocate developing a multi-layered financing market for the small- and mini-sized enterprises vigorously, and advice the government to exert itself to construct a multi-layered financing market and build a trading platform between the large amount of idle money in the society and the urgent demands of small- and mini-sized enterprises for funds. In this way, it can not only give an outlet for the civil capital effectively, but also provide solutions for the limited financing channel s of small- and mini-sized enterprises.
[Lin Huan]: Second, we have our considerations. The regulatory authorities are advised to push the development of such small-sized financial institutions as petty loan company and village/town bank according to the actual situation of regional economic development. In this way, a multi-layered financial service system can be established, where different types of banks may have different service focuses and special customer groups so that they can form different business features instead of the present homogenized competition.
[Lin Huan]: Third, we suggest creating a good policy environment and service mechanism favorable for the development of small- and mini-sized enterprises. On the one hand, some policies supporting small- and mini-sized enterprises in force now should continue their effect, and we advise the government to further provide preferential taxes against these enterprises so as to reduce their operation cost. In the meantime, the government may also encourage and guide the commercial banks to further increase credit extension s to small- and mini-sized enterprises. For instance, the business tax for loans extended by commercial banks to small-sized enterprises may be reduced by half, or losses of loans to small- and mini-sized enterprises may be accrued before tax. Additionally, a range of measures can be taken, such as fast writing-off of non-performing loans. On the other hand, the corresponding service mechanism should be improved. For instance, state-level development funds for small- and mini-sized enterprises may be founded, or government-backed guarantee institutions for small- and mini-sized enterprises may be increased.
[Lin Huan]: Fourth, we also call on to establish a platform where social information can be shared openly. Because asymmetric information is one of the problems that banks worry about the most. Hence, we advocate that relevant authorities for taxation, industry and commerce, technical supervision and others may jointly construct a system for evaluating social credit, which may further press small- and mini-sized enterprises to carry out normative, honest and trustworthy operation and increase their cost in breaching contract and promises. Meanwhile, an information sharing platform may be established among banks to help banks verify some operation situation and the real relationship of enterprises so that they can extend loans in an assured manner.
[Host]: This solves many problems about asymmetric information and resource sharing. Just now you have mentioned four suggestions, which may become a rudiment or a new policy of the banking industry for small- and mini-sized enterprises tomorrow, or in the future. In your opinion, which of the four suggestions will come into effect first, or which is the most pressing one to be solved?
[Lin Huan]: It should be mentioned that the government has take corresponding measures in this area, e.g. in the aspects of preferential policies and taxes and commercial encouragement. For example, the Nine Measures of the State Council were enacted and implemented not long ago, and the Central Government pushed forward a range of financial and tax-related policies for serving the small- and mini-sized enterprises. I believe that a breakthrough has been made now.
[Host]: There will be more diversified approaches. Does IB have any planning for services to the real economy and small- and mini-sized enterprises in the coming years? We shouldn't say in the long run yet.
[Lin Huan]: It should be mentioned that there are two directions. First, we should make further efforts to support those enterprises engaging in real economy with orders and good credit standing. We have actively promoted the marketing extension of the real economy clusters such as manufacturing, modern agriculture, and technology industry, and wholesale & retailing. Our bank will continue promoting branches to further credit extension to these customers by distributing resources and guiding credit direction. For instance, our bank has recently release d a marketing guideline for the catering industry so as to push forward the financial services to brand catering enterprises actively because we believe that these industries and enterprises depending on domestic consumption are not only important areas for achieving stable growth and increasing domestic demands, but also have the potential to grow in the long run. This is one of our key business extensions shared with you.
[Lin Huan]: Second, we consider further pushing innovation in products targeting at small- and mini-sized enterprises following the market principles. We are actively driving our branches to develop and design innovative products or use product portfolios in a flexible way according to the features of objective areas and the situation of small- and mini-sized enterprise groups, so as to establish a special service field of IB for small- and mini-sized enterprise groups and sub-industries. For example, upon mentioning the catering industry, we all know to resort to IB, or in the wholesale market for small commodities, all business owners know that they can get loans from IB conveniently. In addition, we also consider pushing forward the design of some new products like circulating loan, namely the loan that a customer may use as working capital fund for a long period so as to mitigate the shortage of temporary funds. Meanwhile, we are taking into consideration the release of equity financing product, which is an emerging business. Innovation in these areas guides the comprehensive solutions for diversified financing.
[Host]: With your introduction, I can see that the planning of IB for small- and mini-sized enterprises is highly pertinent. As you have said, to bring into play one's own advantages can save many resources because too many banks are falling into homogenized competition now. Actually, we all say that small- and mini-sized enterprises are an economic indicator of a country. The recent fluctuation first affects the small- and mini-sized enterprises. Considering the present situation of such enterprises, do you have any suggestions? How can they resist risks, or can they get loans from IB soon or conveniently while resisting risks?
[Lin Huan]: I have three suggestions. The foremost is to improve themselves and elevate their qualifications. If small- and mini-sized enterprise s hope to get loans fast, it is crucial for them to provide materials to prove their own outstanding qualification. In this way, banks can trust in them and will be willing to support their development. In terms of credit extension, it is unambiguous that banks will support those small- and mini-sized enterprises with good and stable business records, standard operation management, steady production, supply and sale, and the growing potential, and banks will serve them to become bigger and stronger.
[Lin Huan]: Second, small- and mini-sized enterprises should deepen cooperation and improve their ratings. That is to say, as an enterprise, you should have good credit standing record in a bank so that the bank can learn and get to know you in a timely manner. For instance, in the most direct way, the enterprise can have most of its settlement regarding turnover and operation directly handled by the bank, so that the enterprise, as a customer, can increase its settlement records in the bank , which will be helpful to elevate its customer rating. Additionally, in this way, the enterprise can also enjoy preferential service measures of the bank.
[Lin Huan]: Third, small- and mini-sized enterprises should intensify communication and provide active coordination. As I have mentioned just now, we have always been promoting the adjustment of product innovation. We suggest our customers to timely learn some information about our innovative products through our customer managers, and meanwhile introducing their needs for fund and business performance to our customer managers so that they can choose some suitable innovative products.
[Lin Huan]: Additionally, small- and mini-sized enterprises should cooperate with the banks actively, providing true, complete and detailed loan application materials so that they can get financing at a fast rate.
[Host]: Thank you very much for your participation in discussion today with all friends in front of computer s on some situation and information of the small- and mini-sized enterprises of China and on how banks handle certain difficult problems regarding such enterprises. At last, could you say something more to the small- and mini-sized enterprises before the camera, something that they can remember, for instance, you can ask IB for help if you have difficulties. Please say something more.
[Lin Huan]: Thank all friends around China. I should say, although our bank has made some achievements with characteristics in providing financial services to small- and mini-sized enterprises, I hope more that we can win the full trust of small- and mini-sized enterprises in our day-to-day work. This will further improve our confidence to consolidate our cooperation.
[Host]: Thank you, Mr. Lin. And our thanks also go to IB in your introduction. It's such a bank with human-centered corporate culture. Thank you very much.