China Microfinance Project: MSME finance and institution-building
From December 2005 until June 2008, acting on behalf of the China Development Bank (CDB), IPC implemented the China Microfinance Project (CMFP) and provided advisory services to 12 local commercial banks in various regions of China, enabling them to engage in micro and small business lending. The project was supported by the World Bank and Germany’s KfW. The main objectives of the programme were to (1) create accessible finance for micro and small borrowers by designing an efficient credit technology to be implemented by partner banks and their branch networks; (2) achieve wide regional coverage and establish MSE finance as a regular and commercially viable banking product; (3) develop the necessary capacity and expertise of partner banks in the field of microfinance by establishing a massive training programme (classroom and on-the-job training) for all relevant functions, including credit, audit, back office; and (4) build-up advisory capacity of CDB in microfinance.
In implementing the project, IPC’s tasks included: designing a commercially-oriented MSE lending scheme, including processes, procedures, products, monitoring and control; setting up specialised MSE departments at partner banks; supervising lending operations at head-office and branch levels; implementing an appropriate HR and training programme; setting up audit and control functions; developing appropriate MIS/IT; heading credit committee meetings; coaching middle management staff; providing assistance in marketing and branding; providing advice regarding legal impediments for the partner banks; facilitating bank-to-bank lending through the allocation of on-lending funds by CDB to the partner banks; providing assistance to CDB in screening potential new partner banks.
By June 2008, 38,500 loans with a total volume of USD 380 million had been granted to the target group. More than 900 individuals received comprehensive training from IPC in all aspects of small business lending. Over 750 of them are employees and managers of the banks that received technical assistance from IPC and are actively engaged in lending to small and very small enterprises in 68 locations throughout China. All former CMFP partner banks have continued to develop their lending business and today many of them are among the most successful small business lenders in their region. For instance, Taizhou City Commercial Bank and Baoshang Bank nowadays are by far the leading small business lenders in the regions of Zhejiang Province and Inner Mongolia.