Date: September 3, 2014 Source: Fujian Daily (by Xie Zonggui and Wang Yongzhen)
In this June, Industrial Bank (IB) gained the approval of the People’s Bank of China on lowering the deposit reserve ratio by 0.5%, becoming one of the three joint-stock banks meeting the targeted reduction requirements around China.
This can be attributed to the vigorous support lent by IB to small- and mini-sized enterprises. By the end of 2013, the balance of loans extended by IB to small- and mini-sized enterprises hit RMB 421.635 billion, accounting for 33.81% of the total, which registered an increase of RMB 93.963 billion over the beginning of this year, taking up 69.68% of the total of newly-increased loans the whole year. The two indexes both meet and overtop the criteria of the PBC for targeted reduction. As about RMB 11 billion can be saved from the deposit reserve this year, the bank can release more funds to support the real economy.
“It is not only a demand of national policies but also an unavoidable choice for the business transformation and development of a commercial bank to increase financial services to small- and mini-sized enterprises. On one hand, as far as the subjects of financial services are concerned, small- and mini-sized enterprises are a leading force in terms of either quantity of enterprises or employment. On the other hand, against the trend of accelerated financial disintermediation and market-oriented interest rates, commercial banks are propelled to speed up transformation, make active adjustment to business structure and profiting model, sink service focus, pay more attention to SMEs, and keep making innovation to the boost the sustainable development of financial services to small- and mini-sized enterprises.” As the only national listed bank based in Fujian, Vice President Lin Zhangyi of IB indicates, IB had nearly 3,500 new small- and mini-sized corporate customers across the province in the first half year, registering a total of 52,300 small- and mini-sized corporate customers in the province.
A Specialized Operation System, with Service Focus Sunk on Financial Services to Small- and Mini-sized Enterprises
After its establishment in 2007, Fujian Magical Times Digital Technology Co., Ltd. has rented the workshops of Fuzhou Software Park all along. The dispersed locations caused great inconvenience. Last year, Animation Town Phase II of Fuzhou Software Park was completed. The enterprise intended to purchase premises. With limited funds on hands, however, it lost its head for a while. After learning the news, IB granted a 10-year mortgage loan of RMB 23 million, equivalent to 70% of the total purchase price, helping it buy two R&D buildings covering a floor area of more than 6,000 square meters. Meanwhile, IB further added supporting business types including short-term working capital loan, bank’s acceptance bill, and domestic letter of credit, so as to meet the daily financial needs of Magical Times.
Most enterprises in Fuzhou Software Park are technology-based ones with light assets. After growing bigger and stronger, they chose to purchase premises instead of renting houses one after another. However, they couldn't apply for pledge based loans as they haven’t received the ownership certificates. For this reason, the Small-sized Enterprises Department of IB Fuzhou Branch designed factory building mortgage loan in particular and granted loans of RMB 84.50 million to 6 enterprises under the phased guarantee provided by the administration committee of the software base.
The new measures taken by IB in providing services to small- and mini-sized enterprises include special policies, dedicated teams and services to special groups.
Small- and mini-sized enterprises are characterized by massive quantity, varied business strengths, and unstable development, so the loans to them are of high cost and big risks. To provide financial services to small- and mini-sized enterprises, a bank should have a clear understanding of the law of financial services to small- and mini-sized enterprises, and identify the management business risks. With the sinking of customer service focus, IB will fully speed up the specialized reform of financial services to small- and mini-sized enterprises:
Improvement of organization system. A specialized organization system with service teams and relevant mechanism for providing financial services to small- and mini-sized enterprises will be established across the bank. By the end of June, 300 special business teams for small- and mini-sized enterprises have been established altogether to provide integrated financial services to small- and mini-sized enterprises in their respective regions.
Streamlining of business process. Making use of internet and big data, the bank intensifies substantial examination over the first repayment source, which can not only control risks in a better way, but also simplify the formalities for loan application and lower the credit threshold.
Based on the centralized credit reference and examination in the “credit plant”, the bank realizes streamlined operation and plant-based operation in the examination of loans to small- and mini-sized enterprises, shortening the loan examination time.
Meanwhile, it changes the separate operation characterized by low efficiency, which is conducted bits and pieces, and carries out cluster-based batch operation for regional small-sized enterprise groups, characterized industry clusters, and advantageous industry clusters, thus effectively improving the service efficiency and reducing the operation cost.
Settle “High Risks, High Costs and Difficulty in Providing Guarantee” with Special Products and Upgraded Services
An industry and trade company in Xiamen applied to IB for a short-term working capital loan of RMB 3 million by way of real estate pledge. According to the relevant regulations, the loan must first be repaid upon maturity, and then it may be renewed. However, the funds of the company were all put into production and couldn’t be taken out. In last October, IB innovatively launched the “Consecutive Loan”, with which a loan can be renewed for a more year after it becomes mature. The product solved the problem of the company.
By the end of this June, the “Consecutive Loan” has been launched successively in Fuzhou, Xiamen, Quanzhou, Longyan, and Sanming, benefiting 68 small- and mini-sized enterprises.
“The seamless connection of loan extension and repayment can, on one hand, help enterprises to reduce their financing cost, and on the other hand, reduce the risk of disrupted fund chain and reduce the defaulting risk of loans to enterprises”, indicated General Manager Li Taishun of the Small-sized Enterprises Department of IB.
The loans to small- and mini-sized enterprises are characterized by high risks, high costs and difficulty in providing guarantee, which directly leads to the financing difficulty of small- and mini-sized enterprises. Since last year, IB has released a range of special credit products for small- and mini-sized enterprises, trying to settle “high risks, high costs and difficulty in providing guarantee” from different perspectives.
Considering the differentiated business features of small- and mini-sized enterprises and their financing demands which are characterized by “small amount, high frequency and fast rate”, IB designed and released the convenient and efficient “Fast & Quick Loan”, which breaks through the conventional model for examination and approval of banking loans, and with which the bank innovatively evaluates and gives marks to the actual operation performance and risk situation of small-sized corporate customers with the standardized method of “score card”. It significantly improves the financing efficiency of small-sized enterprises. From the launch of “Fast & Quick Loan” in last September to the end of this June, there have been 569 small- and mini-sized enterprises benefiting from the product across the province, and the loans granted totaled RMB 1.742 billion.
At the beginning of this year, IB boldly explored the model of “Platform Finance” and launched the “Trading Loan” free of guarantee. To be specific, depending on the internet platform, the bank has sufficient knowledge on the data of small- and mini-sized enterprises including capital flow, information flow, and credit record, etc., and fully learn their actual production and operation situation based on professional analysis, which will be taken as the basis for give credit score to and judge the reasonable financial needs of small- and mini-sized enterprises. Now, the “Trading Loan” has been granted successfully in Longyan.
“IB Open Sesame” Accompanied the Growth of Enterprises with Special Services
“In August, we launched the IPO plan at the New Third Board and we will try to get listed at the New Third Board in the next year.” Lin Jiazhi, Board Chairman of ENXTO Xiamen Brake System Co., Ltd. told the reporter. With the boost of “IB Open Sesame”, our business entered the stage of fast development, and the sales volume from January to August increased more than 50% YoY.
After establishing the joint venture with a famous brake company of Hong Kong in 2010, ENXTO witnessed great improvement in its research and development strengths. With the orders coming as thick as hail, the working capital became tense suddenly. At the crucial time, IB granted a credit value of RMB 5 million, guaranteeing the enterprise to extend market smoothly. In this year, not only IB increased the credit value to RMB 6 million according to the development need of the enterprise, but also actively guided it to spurt toward the New Third Board and grow stronger and bigger by making use of the capital market.
As early as 2010, IB released the “IB Open Sesame” SME IPO Program to provide customized financial service solutions fitting for SMEs at different stages of growth, namely initialization, growth and maturity, by mobilizing financial service tools in an integrated manner. By the end of June, the number of enterprises pooled in the “IB Open Sesame” program exceeded 3,000, of which those of Fujian accounted for 259.
Some small- and mini-sized enterprises with potential grew at a fissile speed, becoming outstanding players in their industries. By the end of July, the number of enterprises pooled in Quanzhou reached 101, of which 5 planning to launch their IPOs signed agreement with brokerages for guidance, 7 prepared to get listed at the New Third Board, and 15 had the need of capital operation by introducing investment of outside institutions.
With "IB Open Sesame", the services provided by the bank to small- and mini-sized enterprises targeting at certain stages of their development are changed into “chained” services targeting at their life cycles. In this way, reasonable credits can be extended and risks can be controlled effectively based on the actual knowledge on the business operation of small- and mini-sized enterprises.
In this year, IB launched the “Cultivation Program for the Growth of Small- and Mini-sized Enterprises”. By the end of 2016, the bank will establish 100 key operation areas for small- and mini-sized enterprises, and 1,000 key clusters of small- and mini-sized enterprises, and support another 10,000 key credit customers of small- and mini-sized enterprises around China, thus pushing the substantial change of financial services to small- and mini-sized enterprises by way of quantitative change.
□ Reporter's Notes
We will Work Out Solutions With Painful Efforts
Banks have troubles in solving the financing difficulty of small- and mini-sized enterprises because quite a lot of them do not non-standard financial regulations and unclear capital flow. In addition, some key information cannot be shared as the social credit system has not been established completely. The loans to small- and mini-sized enterprises are characterized by high risks, high costs and difficulty in providing guarantee, which make banks feel very hesitant. If loans are granted, the pressing needs of some enterprise can be met, but risks are obvious. If no loans are granted, some small- and mini-sized enterprises may go bankrupt as a result, so banks would be criticized.
As the difficulty already exists, solutions must be worked out. It requires the joints efforts of the government, enterprises and the society to solve the financing difficulty of small- and mini-sized enterprises. As far as loans to small- and mini-sized enterprises, what role do banks should play and to which extent should the role be brought into play have to do with the implementation effect of policies and destinies of enterprises. This depends on the professional service level of banks and the efforts they invest.
IB are greatly concerned with solving the financing difficulty of small- and mini-sized enterprises. While taking it as one of its great concerns, the bank made great efforts in studying the growth process and characteristics of small- and mini-sized enterprises, explore the law for providing financial services to small- and mini-sized enterprises, identify risks and try to control such risks from their professional perspective, and grant reasonable loans. For this purpose, IB established specialized offices, teams and mechanisms, built a well-establish business management system, and release customized financial products such as “Fast & Quick Loan”, “Consecutive Loan”, and “Trading Loan” according to financial needs of different enterprises. Meanwhile, it preset risk points and controlling measures. With such measures, the bank helped some small- and mini-sized enterprises to survive difficulties and grow at accelerated rates, and the bank also benefited from such innovative products.
Concerns are from responsibilities. There are a vast number of small- and mini-sized enterprises across Fujian Province. To relieve them from worries and difficulties is the pressing need of growth and the unavoidable requirement of the whole province’s economic development. We should hold an active attitude and try hard to work out solutions for the problem of financing difficulty encountered by small- and mini-sized enterprises, with the support of professional service means. This is what all relevant parties, financial institutions in particular, should and can do. We believe that they can do and do it well.
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