Online platforms emerge as new champions in lending

Internet finance firms are filling the lending gap left by state-backed banks for small enterprises and the private sector, a mainland peer-to-peer lender said at the Boao Forum yesterday.

Peer-to-peer lenders cut out the intermediaries between traditional lenders and investment vehicles, allowing them to operate at lower costs and have a wider reach, said Gregory Gibb, chairman and chief executive of Ping An Group subsidiary Shanghai Lujiazui International Financial Asset Exchange, which runs a peer-to-peer lending service.

Internet finance was a talking point at the annual forum this year as the mainland's bricks-and-mortar banks face increasing competition from booming internet finance services.

"In China, most loans are not a lot of money, ranging between 30,000 yuan and 50,000 yuan. If you borrow that amount through traditional channels, the operational cost will be high as banks may feel it's not good business," Gibb said.

"But internet finance can offer that at low cost and thus cover a market wider than traditional banks, reaching micro businesses and small and medium enterprises (SMEs)," he said.

The operational cost of lending online is about a fifth of traditional channels as it does away with commission fees and costs associated with opening branches, he said. A report on microfinance released at the forum shows new loans by the banking industry to micro and small businesses increased by two trillion yuan (HK$2.5 trillion) last year, about 23 per cent of all new loans.