The Future of P2P Lending in China, a new report from Celent finds that the peer to peer lending market in China has grown from $30m in 2009 to $940m in 2012, and will reach $7.8bn in 2015.
Key findings of the report include the fact that in the past five years, banking assets in China have been growing steadily at 20% per year, but the structure of the Chinese credit market has been irrational, Celent says. "For example, bank loans tend to be given to large enterprises, while small and medium enterprises find it difficult to obtain a loan. The future Chinese credit market will become more diverse, so as to facilitate the provision of bank loans; interest rates will be liberalized, and a national credit system will be set up."
The company finds that the peer-to-peer (P2P) lending model is one example of such diversification. "P2P lending relies on internet technology to carry out transactions; it also reduces risks and gives rise to competition in interest rates. In practice, the advent of the internet has influenced the finance industry to a certain degree, especially in the personal and small and medium enterprise financial markets. For example, AliFinance has created new business models in the areas of payments, unsecured loans and risk management through the introduction of Internet technologies."
Celent's research revealed that P2P suppliers have increased from 40 in 2009 to 2,000 in 2013. In terms of loan amounts, the most common is between $500-800.
With regard to business models, China's P2P lending is not limited to personal loans. China's P2P users have mixed B2B, B2C, C2B and C2C operations together-lenders can extend loans to companies or individuals, while individuals can also extend credit to other individuals or even companies. China's P2P internet loans include a combination of loans transacted both online and offline, and those that are purely online.
Celent confirms that China currently has more than 2,000 P2P internet microcredit companies, but only around 10 of these companies are members of the China Association of Microfinance. The leaders include CreditEase, PPDAI, and my089.com. Other major financial institutions, such as Ping An Group, have begun P2P credit businesses.
Celent predicts that in the future, the China Banking Regulatory Commission will impose more stringent requirements on the risk management of P2P companies. "Currently, bank funds are not allowed to flow into the P2P unsecured lending sector, and a licensing system may be implemented in the future. P2P lenders may next launch financial management products to meet the various financial needs of investors. P2P lenders may also use technologies such as search engines, social media and cloud computing, etc. to improve credit assessment and risk identification."
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.