Perspectives on Risk Management from a Chinese City Commercial Bank (EN)

How does a leading microfinance player in China manage risks?
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This is an interview with Mr. Chaoge Zhou, Executive Manager, Training Unit of the Small Business Finance Department, Baoshang Bank (BSB), China. The interview is part of a series of interviews with leading Chinese micro and small enterprise (MSE) players conducted by PlaNet Finance on risk management. Baoshang Bank is a leading player in the microfinance sector and one of the first city commercial banks in China to focus on MSE loans as their main strategic direction. Key points from the interview include:

  • Clear strategy from BSBs leadership, support and cooperation from the entire bank, and success at the operational level have contributed to its success in MSE lending;
  • Increase in the non-performing loan ratio and the economic downturn are the biggest risks that BSB faces in MSE lending;
  • BSB mainly relies on its loan officers to collect and analyze information about the client;
  • BSB has not drawn up a specific plan for implementing a scorecard system although it believes that scorecards will be a definite trend in the future;
  • Key challenges to the microfinance industry in China include dealing with overdue loans and the write-off system, in particular pre-tax write offs.

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