Cashflow-based agricultural lending for Minxing VTB
IPC was contracted by Guilin Bank for a three-month project to develop and implement a cashflow-based lending technology targeting regional agricultural businesses (farming, animal husbandry, processing) through its subsidiary Minxing Village and Township Bank (VTB) in Xingan, Guangxi province. The project was divided into three phases consisting of a market survey, designing an appropriate lending technology and preparing lending operations, and lastly implementation through classroom and on-the-job training.
- In cooperation with the local agricultural bureau, assessing business types, production cycles, seasonality and natural hazard exposure, clusters, value chains and their mechanisms
- Market survey assessing financial demand of potential clients, credit histories, access to finance, and competitors
Preparing the bank for lending under the new approach
- Defining the target group: a market segment above smallholder levels
- Developing technological maps for the most relevant production and business forms in the target segment: seasonality, production cycle steps, and average input/output per unit and step
- Developing a set of products, including pricing
- Developing and introducing relevant lending policies and procedures with the bank
- Generating a marketing strategy, including channels and materials: flyers, community meetings, etc.
- Identifying and training up to 10 dedicated agricultural lending staff: loan officers, back office and supervisory staff
- Implementing the new approach through on-the-job training and coaching of dedicated lending and supervisory staff in all aspects and steps of the credit cycle
IPC’s results-oriented and pragmatic approach aimed to sustainably introduce the new approach, including disbursement of the first agricultural loans under the new technology. At the end of the three-month assignment, five dedicated agricultural loan officers had already disbursed three agricultural loans to the target segment. The loans totalled RMB 500,000 (EUR 65,000) and were used for working capital and investment loan purposes in pig husbandry and vineyards. The VTB and Guilin Bank were enabled to build on this experience and expand lending to agricultural businesses successfully in the region.