Development Finance Climate Action & Green Transition Skills & Employment

Introducing cashflow-based MSME lending

Project Details


Guangzhou Rural Commercial Bank




China / South, Southeast & East Asia


Inclusive Finance

Banking & SME Finance



SME Finance


Gernot Kuhlisch

IPC supported Guangzhou Rural Commercial Bank in implementing cash-flow-based MSME 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 MSME lending operations after the consultancy assignment, particularly by establishing and staffing a specialised MSME lending department at head-office level and by expanding MSME-lending operations in 7 outlets through branch-level MSME-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 MSME lending operations
  • developing MSME lending policy, procedures, collateral policy, contract templates
  • developing and implementing a performance-based salary system
  • drafting a business plan for the development of MSME lending at the bank
  • conducting a MSE (loans up to and including RMB 300,000) market survey, including mystery shopping and client questionnaires
  • defining a SME lending (loans from RMB 300,000 to 5 million) target group based on additional market research and drafting a business plan to engage in targeted SME lending
  • designing both MSE and SME loan products, developing a marketing strategy and creating marketing material
  • recruiting and classroom training of both MSE and SME lending staff
  • providing on-the-job training for all MSE and SME 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 MSME 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
  • developing an expansion plan for MSME lending business and supporting the launch to additional branches

IPC’s results-oriented approach aimed to create a healthy and sizable MSME loan portfolio, which would not have been possible without the project, and to establish a dedicated team of MSME-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 MSME-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 MSME-lending units: 7


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