ICBC has big plans for small companies
Lender will widen market access with increased lending to micro enterprises
China’s largest State-owned commercial bank by assets will strengthen financial inclusion, ensuring more than one-third of its new corporate loans are issued to small and micro enterprises in the next three years, according to the bank’s chairman.
“We plan to double our loans related to financial inclusion in the next three years, with growth of over 30 percent a year on average,” said Yi Huiman, chairman of Industrial and Commercial Bank of China Ltd, at a news conference on Sept 26.
As of the end of June, ICBC’s loan book covering small and micro enterprises had increased by more than 17 percent from the beginning of the year, much higher than the average growth of other types of loans.
The bank charged small and micro enterprises an interest rate of 5.26 percent on average as of June 30, and the rate dropped further to 4.64 percent in August — much lower than the rates of lending through other financing channels, according to Yi.
A survey conducted by ICBC in East China’s Zhejiang province found that for small and micro enterprises, while the average lending rate is between 5 and 6 percent at large banks, it has exceeded 15 percent at emerging financial institutions and 20 percent at private lending institutions.
“Currently, financing channels and the allocation of financial resources are overdispersed. Some so-called innovative financial institutions are seeking high returns by taking high risks. It has raised the already high costs of financing among small and micro enterprises, although their financing difficulties seem to be mitigated,” Yi said.
At the moment the nonperforming loan ratio is 2.75 percent among small and micro enterprises, 1.7 percentage points higher than among large enterprises. The nonperforming loan ratio for small businesses granted credit of less than 5 million yuan ($728,000; 632,000 euros; £562,000) is even higher, making it difficult for banks to cover the risks with returns, Yi said.
“The cost of risk is the biggest cost of lending to a small business … so enhancing commercial banks’ risk management is the most important part of developing financial inclusion,” he said.
For small and micro enterprises, ICBC said it will raise the proportion of credit-based loans without collateral to total loans reasonably, increase the supply of medium- and long-term loans according to the demands of small businesses, and provide comprehensive financial services including financial consulting, investment banking and wealth management, at different phases of the business life cycle.
Gu Shu, president of ICBC, said the bank will step up support for small businesses, mainly via three online products offered through an integrated financial service platform.
The bank is using big data analytics to offer credit-based loans without collateral to startups, adopting blockchain technology to provide supply chain financing to small companies, including those at the end of the supply chain, and granting loans to small companies that use real estate as collateral with the help of a database that analyzes real estate information and assesses the market value of property.
ICBC has established 230 centers specializing in serving small and micro enterprises. It has served more than 1 million small businesses, offering a total of more than 9 trillion yuan in loans.
ICBC has said it will increase support for small businesses, mostly through three online products.