COMPANY VISIT

Online lending start-up Jimubox sees hopes in industry shake-up

After a series of industry scandals, the founder of peer-to-peer lending platform Jimubox is confident reforms will see the sector come of age

PUBLISHED : Friday, 15 August, 2014, 10:04am
UPDATED : Saturday, 16 August, 2014, 1:42am

The founder of online lending start-up Jimubox.com says he sees the brighter side of an industry shake-up sparked by tighter regulation following a spate of scandals at similar platforms.

As a matchmaker linking borrowers and individual investors through a website, Jimubox had put a lot of effort into transparency and risk control from day one, said Dong Jun, its founder and chief executive.

"Although we are an online platform, every project needs to go through a due diligence process that is more or less the same as the practice of traditional financial institutions," Dong said.

Borrowers were required to have sufficient income to repay loans, he said, and Jimubox had built a due diligence team to do on-site investigations and data research to reduce default risks.

Every project [on Jimubox.com] needs to go through a due diligence process
DONG JUN, JIMUBOX FOUNDER

Financing projects are listed on the company's website, offering details about the borrower, use of funds, repayment plan and annualised returns.

Peer-to-peer (P2P) lending, part of the mainland's shadow banking sector, has emerged as an alternative for small businesses having difficulty tapping funds from banks due to concerns about bad debt risks. The number of P2P loan platforms on the mainland rose by 35 per cent between January and June to 1,184, and the loan book grew by 45 per cent to 47.7 billion yuan (HK$60 billion), according to Online Lending House, a web portal that tracks the sector. It said the number of players was expected to reach 1,500 by the end of the year, with a loan book of 74.5 billion yuan.

Mainland media reports have described the P2P loan sector as "a barbarically growing business" because loose regulation and a low entry threshold led to some investors suffering losses when online platform owners fled with their money. About 50 such cases occurred in the first half of this year, Online Lending House data shows.

However, Dong sees the other side of the bad news, with the runaways and defaults triggering a tightening of regulations which would benefit the sector's long-term development. "Regulating the market is the best thing the government can do to support the P2P lending sector," he said.

The State Council had recognised that shadow banking was a supplement to fill the funding gap faced by small businesses, Dong added.

"Like every internet company, Jimubox is seeking to expand its scale in this early stage," he said. "We aim for tenfold growth in the total loan amount to surpass 10 billion yuan by the end of next year."

Dong said millions of individuals and small and medium-sized enterprises were expected to raise funds through such platforms and the amount of funds raised each year could exceed 100 billion yuan in the next few years.

"We see huge demand [from small businesses]," he said. "What we do is to look into their risks and disclose selected information on our platform."

The company signed an agreement last month with internet legal service provider Lvgou.com to help examine electronic contracts between borrowers and investors, another step designed to strengthen risk management.

People with as little as 100 yuan can invest through Jimubox in companies in sectors ranging from food and beverage to fashion and tourism. Dong said more than half of its 100,000 investors were younger than 30.

Total investments made via the one-year-old platform had surpassed 1.5 billion yuan, and no bad debts had been recorded, he said. With investment returns of 8 per cent to 14 per cent, Dong said projects listed on the Jimubox platform were alternatives to wealth management products (WMPs).

"But compared with WMPs, projects on our platform are more transparent," Dong said, adding that the internet platform was more flexible when compared with banks.

In February, Jimubox received US$10 million from French investment company Ventech Capital in its series A financing. The money will be used to expand the business and strengthen its team and risk management.

"A strong team is the core of the company," said Dong, a former Wall Street banker with five years of experience in multinational banks. Jimubox's risk management team also includes people who have worked for foreign financial institutions.

Dong said it planned to double the number of staff to 300 by the end of next year.

Jimubox is also seeking tie-ups with companies offering secured and guaranteed projects. In April it signed a strategic partnership deal with the government-backed Hebei Financing Investment Guarantee, which provides re-guarantee services to projects channelled to the online platform. Dong said the company wanted more such tie-ups to expand the sources of projects.

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