Development Finance Environment & Energy Training & Skill Development

MSME diagnostics, cashflow-based MSE lending & risk-based process audit

Project Details


Qishang Bank




China / South, Southeast & East Asia


Banking & SME Finance


SME Finance

Risk-Based Process Audit


Ulrich Weber

Qishang Bank, a local bank in Zibo, Shandong province, contracted IPC to perform diagnostics on its MSME-lending operations. Although Qishang Bank understood itself as an SME bank and neighbourhood bank, it had been catering to large enterprises in the region, mainly larger SMEs and SMEs in the supply chains of larger enterprises. In order to enhance its SME operations, the bank also set up a specialised “Small Enterprise Financial Service Center” in 2009. At the time of the diagnostic study, the bank’s total MSME portfolio exceeded RMB 1 billion, comprising over 1,800 clients; however, MSME business development fell short of management expectations. Qishang Bank thus contracted IPC to conduct an analysis of the bank’s MSME lending activities. Following the diagnostics and based on IPC’s suggestions, Qishang Bank then contracted IPC for a 12-month project to introduce cashflow-based lending technology in their MSE lending activities.

Diagnostics of MSME-lending operations, analysing:

  • organisational structure, including relevant policies, job descriptions, etc.
  • HR management: staff evaluation and incentive scheme; training system
  • market positioning and products
  • procedures and lending operations: portfolio analysis; bank, branches, and staff performance
  • internal control and risk management; IT system/MIS

Introducing cashflow-based MSE lending operations

  • conducting a full-scale IT gap analysis of the credit management system, then recommending and supporting system modifications for MSE lending operations
  • developing MSE lending policy, procedures, collateral policy, contract templates
  • developing and implementing a performance-based salary system
  • drafting a business plan for the development of MSE lending at the bank
  • conducting a market survey, including mystery shopping and client questionnaires
  • designing MSE loan products, developing a marketing strategy and creating marketing material
  • recruiting and classroom training of MSE lending staff
  • providing on-the-job training for MSE loan officers and back-office staff for each stage of the credit cycle: showing, doing together, observing and providing feedback, and finally supervising
  • coaching supervisory staff (supervisors, trainers, head of MSE department)
  • building in-house capacities for classroom trainers and on-the-job mentors
  • participating in credit committees, including executing a veto right during decision-taking
  • providing staff evaluations on a regular basis
  • building-up internal control and credit control capacities by selecting and training specific internal control unit experts
  • developing an expansion plan for MSE lending and supporting the launch to additional branches

IPC’s results-oriented approach aimed to create a healthy and sizable MSE loan portfolio, which would not have been possible without the project, and to establish a dedicated team of MSE-lending staff consisting of loan officers, back-office staff, supervisory staff, in-house trainers and internal control staff.

As IPC was contracted directly by the bank, the performance indicators presented after a project only describe the range typical for such IPC projects in China:

  • outstanding MSE-loan portfolio: RMB 80 – 120 million (EUR 10 – 15.5 million)
  • majority of loans are monthly instalment loans
  • average loan amount: around RMB 250,000 (EUR 32,500)
  • PAR>30 days: 0 – 0.5%
  • recruited and trained lending staff, including supervisory staff: 40 – 60
  • number of branches with operational MSE-lending units: 4-6


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