Small loans prove big step in encouraging China’s switch to consumer culture
More than a dozen firms are now providing consumer finance on mainland
Migrant worker Li Shaodong walked into a motorcycle shop along a dusty road in Shijingshan, on Beijing’s western outskirts, to buy a new motorcycle he could use to make food deliveries.
But the 18-year-old from Baoding, in Hebei province, did not have enough cash to be able to afford the 2,950 yuan (HK$3,300) bike, so he applied for a 12-month loan of 2,600 yuan from Home Credit, a Czech firm that is one of more than a dozen firms allowed to provide consumer finance in mainland China.
The young generation of Chinese migrant workers are trying hard to fit into an urban lifestyle
Li filed a credit application at in-store computer kiosk with help from Home Credit staff. Puffing on a cigarette, he answered a verification call and was told his credit had been granted. Li double-checked the bike, filled it with fuel and rode away.
The whole process took just a few minutes, without the usual formalities of applying for credit in mainland China. Li said he was okay with a monthly interest rate of 1.75 per cent, or 21 per cent a year.
His actual monthly repayment is 279 yuan – 246 yuan on the loan plus account servicing charges, plus 18 yuan for repayment insurance and 15 yuan for a flexible repayment option, two optional add-on charges. If he was paying 279 yuan a month just on the loan it would equal an annual interest rate of 49.65 per cent.
