Flexible policies offered to small firms

China CITIC Bank Corp is revising its policies to encourage client managers to offer loans to small businesses, by removing their concerns for being held responsible for default on loans, as long as they perform due diligence according to the rules of the bank.

"The financing difficulties small and microenterprises face are systematic issues. Compared with the issuance of loans to large enterprises, the risks of lending to small businesses are higher and will drive the increase in banks' nonperforming loans," said Yu Jia, general manager of the inclusive finance department at the Nanjing branch of China CITIC Bank.

"Once loans default, the relevant client managers have to devote all their energy to settlement and collection, and their personal income is also affected," Yu said in an interview with China Daily.

"To solve the problem, our bank is in the process of making revisions to the existing due diligence policy. Our branch is also communicating with the head office, with the hope that those who make the policy regarding nonstandardized financial products will take the characteristics of small and microenterprises into consideration," she said.

As of Sept 30, the non-performing loan ratio of China CITIC Bank was 1.79 percent. The bank allowed the NPL ratio of its lending to small and microenterprises to be 2 percentage points higher than the overall ratio.

"Banks are seeking balance between tightening risk control and giving stronger credit support to small businesses. It's really an issue to study for banks," said Yu.

"Although NPL ratios are quite high regarding the lending to small and microenterprises, it is still necessary for banks to offer loans to small businesses due to their large contribution to the national economy," she said.

Government statistics show that the number of small enterprises in Jiangsu province increased by 22 percent year-on-year to 2.48 million last year. During the same period, the number of small industrial enterprises increased by 6.6 percent to 553,000.

China CITIC Bank set up an inclusive finance department at its Nanjing branch in September 2017. Half a year later, the bank took a step further to establish inclusive finance departments at second-level branches that are under the management of the Nanjing branch.

Before that, the bank did not make it clear which client managers should serve small corporate clients and which should serve large and medium-sized corporate clients.

"When a client manager is allowed to do business with big clients, he or she is reluctant to reach for small ones because the risks of lending to small and microenterprises are high and their loans are usually small," Yu said.

"After we found that problem, the top leaders of our bank's Nanjing branch decided to set up inclusive finance departments at second-level branches and assign certain client managers to serve small and micro corporate clients only. A professional team, specialized in this area of business, has been gradually established," she said.

Previously, different steps of lending to small businesses were scattered among various departments of the bank's Nanjing branch, but now its inclusive finance department is in charge of the whole procedure, including loan approval, loan issuance and post-loan management, she said.

As of the end of September, the Nanjing branch's balance of loans to small and microenterprises reached 1.49 billion yuan ($217 million), up by 690 million yuan from the beginning of this year.