Zhejiang Tailong Commercial Bank

Zhejiang Tailong Commercial Bank is a small commercial bank in Taizhou, Zhejiang. The bank has a relatively short history but its fame is much greater than its small size and short history, because it is credited by many as the Chinese equivalent of the Grameen Bank, the bank for the poor in China, though there are some significant difference between the two.

The bank had a very humble beginning as a credit union with an asset of only one million Renminbi and seven employees in two small rented rooms dated back on June 28, 1993. The bank has since gradually expanded and today, it has a total of nine branches in addition to its headquarter and ranked number two among the biggest eleven local banks in the Luqiao Precinct of Taizhou, Zhejiang, with 21.9% of total local deposits, and 20.27% of total local loans by the end of 2006. On August 15, 2006, the status of the bank was successfully upgraded from credit union to commercial bank, and thus was accordingly renamed as Zhejiang Tailong Commercial Bank from its original name Taizhou City Tailong Urban Credit Union .

Although the credit union was performing adequately in the first half decade since its birth, it was struggling in the fiercely competitive Chinese market, then around 1998, the information on Grameen Bank and its founder Dr. Muhammad Yunus reached the managerial corps of the bank, Dr. Yunus and the Grameen Bank were not as famous as they are today, but the chairman of the board of the Chinese credit union was quick to realize that the general direction for his bank would be in the similar path: continuing to focus on its current clientele of small and mid-sized business by providing better services.

Since its incept, the bank has provided over 60 billion to its clientele, and over 90% of which are peasants whose lands were confiscated and laid-off workers from the state-owned enterprises For its loans made to microbusiness which averages 51,000 , over 90% of the customers are peasants turned entrepreneurs whose lands were confiscated. When these people were forced to turn to small business owners for survivla but was turned away by bigger banks due to the lack of credit history, Zhejiang Tailong Commercial Bank opened its door to them. One of the practice of the bank is that the bank must adjust its hour to that of its client. For example, if a client is vendor close at 9:00 pm, then the bank must not close at anytime earlier than 9:00 pm because the vendor may need to go to the bank after she/he closes. The bank provides rapid service to its customers in that new customers would have the money deposited into their accounts in two to three days by the latest, while old customers could have it done as fast as in 20 minutes. Over 90% of the approved loans would have the money deposited within half a working day period.

The bank has focused continuously on helping the disadvantaged and instead of opening more branches in wealthy urban centers, it opens branches in the less developed regions to help peasants. When the bank opened its branch at Tri-gate county, one of the poorest in Taizhou, Zhejiang, the bank follows a policy that other banks consider strange at the first: the bank would not make any loans that is greater than 5 million. The reason was that most individual customers in the region cannot afford to have such great amount and if the bank concentrate on making big loans like other major commercial banks, it would no longer serve its original purpose of helping the poor.

Since its clientele often lacks the assets required by larger banks when applying for a loan, the Zhejiang Tailong Commercial Bank developed a method similar to the American immigration system: sponsorship. No customer is required to have any assets when applying for a loan, but he or she must have at least one or more sponsor who is responsible for the loan, and these sponsors are those who are very close to the customer and thus know the customer very well. Even when the customer does have assets, sponsorship is still required as a mean of credit check / insurance, because most Chinese lack credit history. Over 90% of loans made is less than one million (around 125,000.

The 200+ loan officers who greatly contributed to the success of the bank is consisted of more than one third of the total staff. Due to the lack of credit history in China, the loan officers were tasked with much more duties than their counterparts, including investigating the loan applicants’ credit based on the following criteria:
Cashflow of the business, including to ability to pay back the loan.
Management of the business, including the person’s reputation and managerial ability
Marketing, including the competitiveness of the product and the sensitivity to the market
Production, including assets and stock
The loan officers are required to start the initial investigation within one to three days after the application and then perform periodic but often unscheduled audit after the loan is approved.

In addition to the work of loan officers, the banks also institute a strict policy of not making any new loans to customers who still have not completely paid back an earlier loan. As a result of these measures, the non-performing loans of the bank has never exceeded 0.9%, and mostly are kept at less than 0.83% range. Even for the non-performing loans, over 90% of which were paid back by the applicant without the help of sponsors.

The bank is also famous for its harsh policy set for its employees: once a customer of the bank with good credit history offered to lend his BMW sedan to a loan officer for a joyride, and the loan officer accepted. When this was revealed, the loan officer was immediately fired. Such strict measured helped to keep the corruption in check and has helped to earn a good reputation for the bank. As a result, customers trusted the bank and had come back repeatedly: The bank had maintained a core of long term customers of more than 8,000, and the total number of local small and mid-sized business that have borrowed money from the bank has already exceeded 30,000, with many of them borrowed more than 100 times.

Although many in China as well as outside China termed the Zhejiang Tailong Commercial Bank as the equivalent of the Grameen Bank, which certainly provided valuable experience and guidelines for the Chinese bank, the two are actually significantly different. The most important difference is that the Chinese bank is purely operating in the commercial mode and does not receive or provide any form of subsidize to or from anyone, because the bank executives do not believe that they are a charity organization.