SME Lending Methodology
The client assessment is mainly based on non-financial analysis. The client managers are very well connected in their allotted communities and therefore can use different informal channels to obtain information on the client. Cross checking with community heads, neighbors, persons with influence, friends and family is common.
The main famous investigation approach adopted to solve effectively the client information asymmetry problem in SME lending is called “3 Factors-3 Documents”. The former refers to the assessment of the client’s integrity, products and property. The latter refers to the collection and analyzing of three consumption/supply-related figures, such as the electricity and water meter or the customs documentation stating the volumes exported within recent months.
Besides, another efficient method used widely to assess and control credit risk is “3 inquiries and 5 double-checkings”. 3 inquiries encompass making inquiries about client’s credit report, client black list in MIS and client cash flow status. And 5 double-checkings include double checking the eligibility of applicant’s legal entity, business operations, historical credit records, asset and liability situation as well as the loan purpose.
Read more about this topic: Zhejiang Tailong Commercial Bank
Famous quotes containing the words lending and/or methodology:
“If there is among you anyone in need, a member of your community in any of your towns within the land that the LORD your God is giving you, do not be hard-hearted or tight-fisted toward your needy neighbor. You should rather open your hand, willingly lending enough to meet the need, whatever it may be.”
—Bible: Hebrew, Deuteronomy 15:7,8.
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