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Introducing cashflow-based MSE lending

Project Details


Bank of Changzhi




China / South, Southeast & East Asia


Banking & SME Finance

Inclusive Finance


SME Finance



Ulrich Weber

IPC supported Changzhi in implementing cash-flow-based MSE lending operations and building these capacities by applying international best practices and standards. The project aimed to enable the bank to develop and further expand MSE lending operations after the consultancy assignment, particularly by establishing and staffing a specialised MSE lending department at head-office level and by expanding MSE-lending operations in a number of outlets through branch-level MSE-lending units.

IPC implemented the following tasks:

  • conducting an IT gap analysis of the bank’s 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; such training comprises showing, then doing together, then 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 business and supporting the launch to additional branches

IPC’s results-oriented approach aimed to create a healthy and sizeable 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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