Wednesday 24th August 2016
Our most recent member in China, Bank of Luoyang was established in 1997 and is headquartered in Luoyang City in Central China’s Henan Province – in what is widely recognized as the region where Chinese civilization originated. BOL positions itself as an SME bank and over the past decade has been outperforming its commercial bank peers in the city and the province. Given that 64 percent of SMEs in China (and an estimated 50 percent in Luoyang City) have at least partial female ownership, while just 20 percent of the bank’s current SME customers are women, the bank has decided to become the “bank of choice” for women in Luoyang. In this interview, Ms. Yanping Fu, Vice President, spoke with the Global Banking Alliance for Women about the bank’s decision to join the Alliance, its hopes for the planned Women’s Market program, and the role the bank plays in supporting women.
GBA: The fact that 64 percent of SMEs in China and half of those in Luoyang have some form of female ownership is high by global standards. Can you provide us with some context as to why women are so well-represented in business?
Yanping: The internet and online trading are developing rapidly in China, and it’s become increasingly easy for entrepreneurs to open online stores due to low market entry barriers. Because of this, more and more women are starting businesses in clothing, food, commodities, cosmetics, etc. These businesses, most of which are SMEs, tend to have a lower average rate of failure, as women are good planners and prudent business owners.
GBA: Just 20 percent of your current SME customers are women. In China, what are the barriers to women accessing finance from banks?
Yanping: The financing difficulties women-owned SMEs face in China are mainly because of SMEs’ relatively high level of risk in business operation, lack of financial management skills, less collateral and complex loan processes within banks.
Women tend to be more willing to borrow money from their relatives or friends than banks. But we have found that if a woman SME owner becomes our client, she will always be our client – which is good for the bank, as women customers have lower loan default rates than men. That also played into our decision to launch our Banking on Women Program.
GBA: Do you view the growing number of alternative providers of finance – including online peer-to-peer (P2P) platforms and financial technology companies such as Ant Financial Services Group – as a threat to BOL and banks in general? What is BOL’s strategy to compete with them?
Yanping: From market research in Zhengzhou and Luoyang City, we found that it’s not very common for women SME owners to choose online credit products. However, a few of them who have tried them gave them very high marks due to their convenience and fast application process. But they also saw some shortcomings, such as high interest rates and low loan amounts – usually less than US$40,000. Therefore, most people are using online credit platforms for very short-term working capital. That’s where our chance to serve the customers is.
To combat these online lending platforms, we have made the following changes within our bank:
First, we are working hard to optimize our loan procedure, shortening the material collection and application periods by using a big data analysis and an advanced business system instead of our traditional review, which was manual.
Second, we are focusing on the long-term loan demand of the customer, looking at what will ultimately help their business run well and sustainably. We are providing lower interest rates, higher loan amounts and longer loan periods, and also non-financial services, such as financial skill training courses, a women SMEs club, etc.
Finally, we are also open to collaborating with outstanding online platforms that have experience with personal social data analysis and risk management to accelerate our own internet business development. In 2015 we signed a strategic cooperation agreement with one such organization, We Bank, which was founded by Tencent (QQ).
Yanping: We were one of the earliest local banks to get into the SME financing business in Henan province, setting up our SME financial service department in 2008. Over the last 10 years, we have served more than 70,000 SME customers, with more than US$2.5 billion in loans issued. We have also built a strong brand image in our local market for our fast underwriting speed; we promise to issue a loan within 7 days from when the materials are submitted, and we always keep our word.
Based on the results of our Women’s Market research, we learned that women are time poorer, willing to share, and eager to learn and be recognized. For our Banking on Women Program, we will not only offer our existing fast loan issuing time, but also service packages that include different combinations of financial products and non-financial services according to the specific demands of the women SME owners.
GBA: A lot of women business owners would be categorized as “start-ups.” Does BOL have a strategy for start-ups?
Yanping: Supporting start-ups is one of our most important strategies for the next few years, especially technological innovation firms. Luoyang City, together with Zhengzhou and Xinxiang City, have become one of the 12 national independent innovation demonstration zones, called Zheng Luo Xin. These bring great development opportunities for start-ups.
The China Banking Regulatory Commission is recommending banks use a combination of investment and loans for start-ups, which is a new business model that we are working on.
In addition, we notice a lot of women who own start-ups have been laid off from bigger firms or are online business owners. For laid off workers, we have a re-employment loan product in cooperation with the local government that has a very low interest rate and helps start a small business. For online store owners, we have online credit products with flexible repayment methods and periods, in order to meet their short-term capital needs.
GBA: In November 2015, you signed a risk sharing agreement with the IFC to provide a three–years risk-sharing facility (RSF) dedicated to supporting an RMB 900 million lending portfolio to women-owned SMEs and women entrepreneurs, originated by Bank of Luoyang. What role did this RSF have in your decision to launch a program for women?
Yanping: Signing the risk sharing agreement was the very beginning of the whole Banking on Women Program. As our cooperation with IFC is progressing smoothly and gradually deepening, along with our own deeper understanding of customer classification management and customer character analysis based on market research, we recognize that while the 3-year RSF is attractive for new women customers, it is necessary to develop a tailored value proposition for women customers. The RSF gave us a brand new view on how to classify and analyze customers, and has helped us to find a different and special route for sustainable development.
GBA: You are in the design phase of your Women’s Market program. Are you looking at other segments, beyond SMEs, for your program?
Yanping: We are designing our products and services for women-owned SMEs using different methods, including personal surveys, group interviews and discussions, and other market research techniques, in order to satisfy the needs of customers. Through this research we have determined that the most important things to women SME owners are financing, time saving, self-improvement, balance between family and career, and social activities.
We are planning to provide specialized products for other segments, such as white-collar women, full-time mothers, etc. As women who own SMEs can also be mothers, daughters and wives, we want to make sure we provide a holistic package that meets all needs, containing financial offerings as well as insurance, training and other non-financial services. We then plan to take this business model and develop additional new segments.
GBA: What will you do to gain buy-in from the staff around this strategy?
Yanping: Before starting the Banking on Women Program, we made sure the program’s leadership group, bank chief executives and senior management built a clear framework for getting buy-in from all relevant departments. This leadership group will be responsible for pushing the program forward and ensuring everything moves smoothly.
At the same time, we created a powerful staff incentive assessment mechanism. Therefore, all groups, departments, staff and relationship managers will fully cooperate with the process, which will finally expand our number of women customers, enhance customer loyalty, improve revenue and help us to form a special business model to realize sustainable development.
GBA: How did you first hear about the GBA? Why did you decide to join?
Yanping: IFC shared with us the successful experiences and case studies of GBA banks with the Women’s Market worldwide, and they highly recommend GBA for us.
We applied to join GBA after a brief investigation into the organization’s background. By joining GBA, we gain access to knowledge sharing and communication with a worldwide peer learning network. It is a more convenient and easier way to learn from their experiences. At the same time, it will help us to increase our own brand influence and enhance our domestic and overseas popularity.