Ping An Puhui sees growth in tapping China’s blue-collar workers and small businesses
Shanghai-based micro-finance lender aims to bolster its loans book by eightfold to 1 trillion yuan by 2020
Ping An Puhui, a unit of Ping An Insurance Group, sees an opportunity to bolster its China loans business eightfold over the next four years, as it provides financing to a segment of the population that has been traditionally shunned by larger commercial banks.
An estimated 67 million startup companies and 270 million blue-collar workers in China are not adequately served by the country’s commercial banks, often having their business loans or credit cards rejected.
By tapping into this market segment, Puhui could grow its loans book to one trillion yuan (HK$1.16 trillion) by 2020, from the current 120 billion yuan, said the Shanghai-based company’s chief product office Ni Rongqing. Puhui focuses on small loans ranging from 2,000 yuan to 30,000 yuan.
“There are a staggering number of youngsters who have difficulties in accessing financial services,” Ni said. “We want to launch a service based on mobile phones to meet all of their financing demands.”
The size of financing for retail spending stood at 19 trillion yuan last year in China, and the figure would hit 41 trillion yuan in 2019, according to consultancy iResearch.
Ni said that residents and small companies in 276 cities on the mainland could be served after it upgraded technologies and expanded networks to follow Beijing’s directions of bolstering inclusive financing, a notion under which people from all walks of life could obtain much-needed credit.
Mainland banks, enjoying a big net interest margin under the central bank’s guided deposit and lending rates, used to focus on only state-owned companies while being reluctant to offer loans to individuals and mom-and-pop shops.
Puhui is competing against mainland banks and China’s internet giants such as Baidu, Alibaba and JD.com to vie for a big share of the consumer credit market. Alibaba is owner of the South China Morning Post.
The current Chinese leadership, pushing to reform the financial system’s current domination by state-owned banks, has been advocating growth of the market for so-called micro finance.
The push has led to the growth of peer-to-peer lending, or P2P platforms in China. Combining easy money with technological advances such as crowd sourcing, mobile telecommunications and social networks, more than 3,000 P2P platforms have sprouted in the past four year, offering loans for individuals and businesses.
Lacking stringent oversight, as many as 1,000 of these P2P platforms had questionable practises, as they failed to comply with regulatory rules or were exposed to huge risks.
Late last year, Ezubao, one of the largest P2P players in China, was found to have conducted fraud to illegally raise 50 billion yuan from investors.
Last week, the China Banking Regulatory Commission published a rule that capped the total loans for individual loans at one million yuan per person via P2P platforms, to ward off potential risks.
China Rapid Finance, a leading P2P platform that helps finance people’s purchases of goods such as home appliances, said in a statement that it was the latest sign that the central government would continue to pursue the ultimate goal of inclusive financing with a clear-cut rules governing the healthy growth of P2P.
“Micro finance will be a big and high-growth market with various kinds of players competing for a share,” said Wang Feng, chairman of Shanghai-based Ye Lang Capital. “But success hinges on the capability of managing risk. After all, China is huge and most of the targeted clients are not well educated.”