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.