Chinese Banks courting Microbusinesses

Businesses along a street in China.

Small and microbusinesses are becoming more sought after by Chinese banks as they attempt to build their business base, reports China Daily.   With competition increasing, this strategic shift is now becoming in vogue, especially with smaller or newer banks.

The term “client sinking” is the new parlance, meaning that rather than nurturing high-profile large companies, the industry is looking to medium, small and micro businesses, said Ba Shusong, a banking expert with the Development Research Center under the State Council, China’s cabinet.

Challenges still persist for micro and SME clients, however.  In many cases, handling and processing charges make smaller loans more expensive compared to the principal.  Other issues include the unfamiliarity of large banks to understand the needs of small and microbusinesses.  One example being that most loans issued are short term loans, while longer term loans are really needed by clients such as farmers who require equipment purchases.

Some small banks are proving to be much more flexible, however.  This is partly out of their own necessity as they strive to gain market share with more limited resources.  Minsheng bank, for example, mandated to its branches to specialize in local industries like tea, stone and fishing, so they could better understand and assist local micro business needs.

Another successful example given is that of Alibaba Group which has issued more than 70 Billion Yuan (about $11.4 Billion U.S.) to over 227,000 small and micro businesses.

 

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