Zhejiang Tailong Commercial Bank , one of several SME financing service leading providers, is headquartered in Taizhou, Zhejiang Province, Eastern China. Since its inception, the bank has cumulatively provided over ¥150 billion loans with average loan size of ¥500,000 to its clientele, and over 90% of which are peasants-turned entrepreneurs. As its clientele often lacks the assets required by larger banks when applying for a loan, TLB grants and disburses loans secured through guarantors, which collateral form accounts for 99% of the total loans outstanding. In addition to that, the number of loan officers is almost half of the total staff, due to the labor-intensive nature of SME lending business. By the end of December 2011, TLB had eight branches, two village and town banks and 50 sub-branches which are mainly spread out around the Yangtze River Delta region.
History
It was founded in 1993 with a registered capital of RMB 1 million and 7 staff, positioning itself at the very beginning as the small-and-micro-enterprise financing service provider and being upgraded from credit union to commercial bank in 2006, is one of few complete private holding city commercial banks in China. Although the credit union was performing adequately in the first half decade since its birth, it was struggling in the fiercely competitive Chinese market. As a result, the bank focusses its market strategy on small and mid-sized business. By the end of December 2011, TLB had RMB 39 billion of deposit balance and RMB 26 billion of outstanding loans with NPL ratio of 0.58%, thereof SME loans took up more than 90%. When starting operations in 1993, the bank did not have many other choices than going into the niche of SME. Nowadays, the interdependence of its market and the bank is seen just as between “a fish and water”.
Business
TLB has a strongly decentralized structure and delegates many authorities to the branches and sub-branches. Approximately more than 80% of all loan decisions can be made at sub-branch level. Although TLB was performing adequately in the inception phase, it was struggling in the fiercely competitive Chinese market. As a result, the bank developed and provided some distinct and unique products to SMEs. as regards SME’s lack of collaterals required by bigger banks, TLB serves them special loans secured only through guarantors to attract more clients. Up to now, this kind of loans take up more than 90% of total loans outstanding in terms of volume and 99% in terms of number of clients. Besides, TLB has been striving to improve and enhance its customer-centered service culture as what it is conveying in practice through convenient and efficient service providing. It is a practice and also a rule reflecting the efficiency that loans for old client should be granted and disbursed within 3 hours once the application is presented whereas loans for new ones within 3 days.
SME lending methodology
The client assessment is mainly based on non-financial analysis. The client managers are very well connected in their allotted communities and therefore can use different informal channels to obtain information on the client. Cross checking with community heads, neighbors, persons with influence, friends and family is common. The main famous investigation approach adopted to solve effectively the client information asymmetry problem in SME lending is called “3 Factors-3 Documents”. The former refers to the assessment of the client’s integrity, products and property. The latter refers to the collection and analyzing of three consumption/supply-related figures, such as the electricity and water meter or the customs documentation stating the volumes exported within recent months. Besides, another efficient method used widely to assess and control credit risk is “3 inquiries and 5 double-checkings”. 3 inquiries encompass making inquiries about client’s credit report, client black list in MIS and client cash flow status. And 5 double-checkings include double checking the eligibility of applicant’s legal entity, business operations, historical credit records, asset and liability situation as well as the loan purpose.
