Private financing built on patience
While CreditEase is gaining attention from would-be investors, its chief says peer-to-peer concept will take time to set in on the mainland
CreditEase, a private financing company set up by Chinese who returned home, is prepared to wait a long time for success. The patience of the founders reflects the fact that the mainland has had a peer-to-peer credit system for only seven years.
Outstanding loans arranged by CreditEase have grown to more than 10 billion yuan (HK$12.5 billion), while financial products it sources from financial institutions for sale to affluent clients came to an even larger number, said Tang Ning, CreditEase's founder and chief executive.
The company is one of the mainland's first peer-to-peer (P2P) lending firms. Tang, who studied economics in the United States, founded CreditEase in Beijing in 2006 as an analogue of the London-based Zopa, which bypasses banks to facilitate loans between individuals. It drew attention from global investors this month when the San Francisco-based P2P firm Lending Club, after six years of operation, said it had turned a profit and was considering a stock market listing next year. However, its Chinese peer CreditEase shuns any concrete timetable for profit or an initial public offering.
"It is still our initial stage to tap into the huge market, which is worth more than one trillion yuan," Tang said. "It will take relatively a long time for us to succeed in the market and even longer to verify our success in a place where private creditability grows from nowhere."
In western countries, a testimony of trust is lending and a proof of trustworthiness is paying back, based on a credit appraisal given by a third-party professional agency, he said. However, on the mainland, where the market economy has a short history and there is little track record on personal credit, survival is challenging for the country's thousands of private financing companies, Tang said.
"I didn't expect it would be so hard to introduce the concept of creditability to the mainland," he said. "P2P lending is basically lending to strangers, based on risk assessment. There are early adopters, but there are also stubborn resisters."