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Micro-loans to attract banks

New Express News  Over the past few months, the industry holds that China's market-based interest rate reforms will prompt commercial banks to shift their business focus onto small companies. However, amid the macro-economic slowdown, most banks seem to be waiting for clearer signals before taking action. 

CMB is likely to break this deadlock.

Recently, CMB HQ Retail Banking Department GM Assistant Zhao Xiaojun announced that CMB has fully launched its SME credit business. This year, CMB has extended micro-loans of RMB100 billion, up RMB60 billion from last year.

To implement a standard and centralized operation mode to reduce micro-loan business OPEX, CMB recently established a micro-loan approval center and has regained micro-loan approval rights from 13 branches.

Prompted by narrowing spreads and slowdown in profit growth, it is reasonable for banks to shift focus onto highly profitable micro-loans.

However, it is unlikely that major banks are uninterested in high-risk and high-cost micro-loans, which are in fact avoided by most micro-loan providers.

According to Zhao, CMB has started to provide micro-loans of less than RMB500,000 nationwide. To borrow a micro-loan, the borrower does not need to provide collateral or a pledge, except for basic application materials. Moreover, CMB provides door-to-door services.

Zhao indicated that the micro-loan business is a strategic part of CMB's second reform plan.

Since April this year, CMB began trialing the micro-loan business in Shenzhen, raising the credit limit to over RMB1 billion.

According to the deputy general manager of the corporate customer business department of a state-owned bank, it is inevitable that the banking industry will down pace its shift to the SME financing market.