The major banks used to build their services around the needs of multinationals and leading local corporations, overlooking to a certain extent the requirements and importance of small and medium-sized enterprises (SMEs). There was perhaps a feeling that SMEs had lower credit ratings, less cash flow and, individually, were unlikely to generate the same level of business for the banks.
Perceptions, though, have changed and the significance of the SME sector is now fully recognised. In fact, according to the Hong Kong Small and Medium Enterprise Association, about 98 per cent of local businesses are classified as SMEs, representing the lifeblood of the community's commerce, trade and industry.
Seeing the opportunity rather than the risk that this presents, banks are now establishing dedicated units to look after such customers. Leading the way is Hang Seng Bank, which launched a specialist service in 2002 and has positioned itself as a longstanding business partner of SMEs, says assistant general manager Thomas Tsui.
It is offering everything from secured and unsecured credit facilities to insurance, investment, e-banking and cash management. If required, clients can also get assistance with trade-related financing, human resources solutions, group life plans and payroll services.
With plans to open two new business banking centres in 2006 to join the 11 now in operation, Hang Seng Bank expects to add to the more than 100,000 SME customers it already works with. "This business is projected to grow significantly, given the strength of the economy and rising consumer spending," says Mr Tsui. "Although interest rates are likely to increase during the year, SME business owners are planning for expansion and further hiring. This means they will look to us for financing and other types of assistance."
Anticipating this, the bank has recently rolled out several new product and service initiatives, which include a co-branded commercial credit card for the 9,000 members of the New Territories General Chamber of Commerce. The card is linked with a trade finance account. All trade dealings conducted through this account will yield complimentary cash dollars, the amount of which will be based on the value of transactions. "Besides, the card facilitates easy settlement of business bills and company expenses," Mr Tsui notes.
A tailored mortgage-linked deposit account package is offered to enable SMEs to earn higher interest on their savings deposits. "Whenever customers secure this kind of loan, they are eligible for preferential interest rates on their savings accounts. This is substantially higher than the normal rate and makes it possible for them to offset payments by what they earn from the interest on their savings," Mr Tsui explains.
Realising that SMEs need flexibility and support, the bank has revised its policy and procedures for granting loans. Previously, many complained that the application and approval process was cumbersome, involving too much paperwork and the mandatory requirement to have property as collateral. "These days, collateral is not a necessary requirement and the whole system has been streamlined," notes Mr Tsui. "Customers with a clean credit record can also take advantage of pre-approved loans." Demonstrating the advances made in the area of e-banking and the extra convenience it provides for clients, around 45 per cent of these loan applications are now handled via the Internet.
In addition to dealing with an increasing volume of credit, trade-related and financing requests, Hang Seng is also actively promoting its wealth management products. These are being enhanced every year and now include certificates of deposit, capital-protected deposits and capital guaranteed funds. "When it comes to managing company funds, SMEs are generally risk averse and prefer capital-protected investment products and commercial insurance. That said, a few still go for higher-risk instruments such as equity-linked and forex-linked deposits," Mr Tsui adds.
To keep pace with this marketing drive and the growth in overall business, an extra 100 specialists will be recruited in 2006. "We will be hiring more relationship managers and marketing officers to strengthen our business ties with the SME sector," Mr Tsui reveals. Marketing officers have responsibility for securing new customer accounts, while relationship managers review the banking needs of existing clients and propose individual solutions for them. Applicants interested in marketing positions need at least a higher diploma and one year's work experience, while prospective relationship managers should have a university degree and two years of commercial lending experience.
Mr Tsui was keen to emphasise the importance the bank now attaches to being a key provider of financial services for SMEs. "We have a broad network of branch locations, excellent staff support and effective risk management procedures," he says. "More than anything else, we have demonstrated an organisational commitment to engage in a total partner relationship and drive SME businesses forward with leading-edge solutions."
- SMEs play a vital role in sustaining Hong Kong's trade,
commerce and industry
- Tailor-made banking support is being offered to promote
the sector's expansion
- New products and services make it easier to obtain loans
and handle transactions
- Banks are hiring to support the anticipated growth of
their business with SMEs