Banking & Finance

Industrial Bank set ups inclusive finance department to bolster small business lending

PUBLISHED : Monday, 09 October, 2017, 6:25pm
UPDATED : Monday, 09 October, 2017, 6:25pm

Industrial Bank said on Monday it has set up an inclusive finance department, reflecting the latest effort of banks to benefit from regulatory incentives to ramp up financing to small businesses and low-income individuals.

The Fujian-based bank said the new department signals the bank is “on a fast track for inclusive finance”, or financial services offered to micro and small businesses, start-ups, farmers, and low-income individuals, with a designated team and management mechanism.

Beijing has been eager to steer lending and financial services from big companies to smaller business and underprivileged consumers as part of a broader aim to shore up the economy.

The People’s Bank of China announced on September 30 that it would lower the amount of money banks must keep at the central bank against loans for banks that meet requirements on inclusive financing, effectively from 2018.

The central bank also extended the scope of inclusive financing to help fund entrepreneurship and poverty-relief projects, on top of financing to small businesses and the agricultural sector.

“We think this targeted reserve requirement rate cut will serve as a carrot for banks to increase their support to inclusive finance to support China’s reform agenda,” said Tommy Xie, an economist at OCBC Bank.

The three-month window could give some financial institutions time to realign their lending policies to support inclusive finance, he said in a research note.

Mid-sized Industrial Bank said it will align internal resources and policies towards the development of inclusive financing with a designated mechanism on risk management, resources allocation, evaluation and comprehensive services.

The central government said in its 2017 government work report in March that it encourages the set-up of inclusive finance to help resolve the financing issue of smaller businesses and asked big state-owned banks to take the lead.

China’s banking regulator and other government bodies in May jointly released a guideline requiring big banks to set up inclusive finance departments by the end of this year and encouraged mid-sized banks to do the same.

So far, the nation’s five biggest banks – Industrial and Commercial Bank of China, China Construction Bank, Bank of China, Agricultural Bank of China and Bank of Communications – have set up inclusive financial departments.