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Introducing and developing cashflow-based SME lending

Project Details

CLIENT

Tianjin Rural Commercial Bank

YEAR

2014-2017

COUNTRY / REGION

China / South, Southeast & East Asia

EXPERTISE

Banking & SME Finance

Training & Skill Development

KEY TOPICS

SME Finance

HR Development & Training

CONTACT

Ulrich Weber

IPC supported Tianjin Rural Commercial Bank in the area of SME lending over a period of three years. IPC first demonstrated the potential to apply cashflow-based lending to SME clients through a “bank-in-a-bank” approach at TRCB. Following this initial success, the next step was to further consolidate, strengthen and integrate SME lending capacities by merging the newly created SME lending department into TRCB’s traditional branch network. By fully incorporating IPC’s cashflow-based SME lending approach into the existing lending structure and processes of the bank, we were able to ensure that all new loans below RMB 10 million, for both new and existing clients, were assessed using a rigorous approach shared by traditional account managers and IPC-trained SME risk analysts.

The main goal of the project was thus to develop, jointly with TRCB, a model which would ensure the sustainable and successful development of SME lending throughout the entire bank. IPC’s experts implemented the following tasks:

  • developing and jointly approving the procedural framework for the project
  • creating SME policy and procedures to organically combine IPC core principles and traditional TRCB interests
  • recruiting and training over 50 SME risk analyst staff
  • developing and implementing a staff evaluation system
  • developing a risk-based client segmentation screening tool to increase efficiency, focusing analysis on riskier clients and riskier aspects of clients
  • developing and implementing classroom and on-the-job training measures and material for staff involved in SME lending (account managers, risk analysts, back-office staff and supervisors) on all aspects of the credit cycle, the correct application of a client-segmentation screening tool, risk-mitigation processes during financial analysis, financial résumé processing and credit decision-making
  • implementing the new approach to SME lending operations, initially at a pilot branch
  • together with the management of TRCB’s MSME department, developing an expansion mechanism for SME lending operations and rolling out the new SME lending approach to additional branches, eventually covering all of TRCB’s operations
  • participating in SME credit committees and exercising a veto right on credit decisions
  • providing support and guidance to multipliers, trainers and supervisory staff

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