'Micro-financing' for small shops

Chen Dongliang, aged 37, a peasant-turned-businessman, is ordering two more machines this month for producing car seat cushions.

He is financing the investment with 60,000 yuan borrowed from a local private bank.

It is the second time for Chen to borrow money from Taizhou Commercial Bank (TCB), a pioneer in China's banking industry, offering micro-financing to small business owners.

"With the timely loan, we have expanded our workshop from one machine with four workers to the current four machines with 16 workers," Chen tells China Business Weekly at his busy factory in Taizhou, East China's Zhejiang Province.

Last March, Chen received his first loan of 30,000 yuan from TCB and paid it back half a year later. Soon he asked for another loan and he says he "will continue to apply for loans from TCB" if he needs money in the future.

Chen is just one of thousands of Taizhou's start-up businessmen who turn to 44 yellow-painted TCB branches across the Taizhou area for loan support because they have long found the doors of big national banks like Bank of China closed to them.

The charm of TCB, one of the few privately held banks in China, lies in "creating an equal loaning opportunity for all small business owners", says Wang Weiwen, director of the micro-finance department of TCB.

"Previously, they couldn't borrow a small amount of money, like thousands of yuan, from big banks to solve urgent money shortages when expanding their businesses," says Wang. "But they can do it with TCB."

Founded in 1988, TCB has been transformed from a small financial service agency with the starting capital of only100,000 yuan and six employees to a prestigious private commercial bank.

Some 20,000 clients currently borrow money from TCB in amounts ranging from 2,000 yuan to millions. At least 66 percent of clients borrow less than 1 million yuan.

TCB reported last year's profits at 340 million yuan, achieving a remarkable return on total assets of 2.62 percent.

"At the beginning, we were forced to loan to small business owners for the sake of survival because we were small, but now we voluntarily take them as our clients," says Chen Xiaojun, the founder and president of TCB, who employs some 1,100 people in his business.

To the surprise of both clients and competitors, TCB has a high efficiency in dealing with loan applications. It can approve a loan for an existing client within 10 minutes and for new customers within two days. Its loan officers in charge of the micro-finance business can handle 30 clients in a single day.

"People are dumbfounded to see our speed in processing loan applications and have questioned our methods," says Wang. "I tell them the efficiency is based on a huge amount of investigation before hand and guaranteed by a complete set of mechanisms."

What's unique for TCB's loan officers is that they spend most of their work time not in the office, but outside talking at length with factory owners, storekeepers, company managers and even pig farmers.

TCB's long-term effort to offer micro-financing loans finally won the acceptance of China Development Bank (CDB), one of the three policy banks in China, in 2005 when CDB was eager to find a suitable partner bank to carry out its micro-financing experiment.

After signing a contract with CDB in October, 2005, TCB became one of the two pilot banks in China to test a sustainable micro-finance banking system.

Under the financial support of CDB and the technical support of International Project Consultants, a bank famed for small-scale financing in Europe, TCB has developed the micro-finance project in Taizhou since the end of 2005.

As Chen Xiaojun told China Business Weekly, even if CDB didn't partner with TCB, it would continue single-handedly to explore the micro-finance business.

"TCB was born in the soil of Taizhou's booming small commodity economy, and only by continuing to serve those small business owners can TCB survive and grow in the future," says Chen.

(China Daily 03/12/2007 page12)