China bans microlenders from offering consumer loans to college students to curb over-lending
- Move will prevent some 30 million college students across the country from falling into debt traps
- Microcredit firms can offer loans at a maximum interest rate of up to four times the benchmark rate set by the central bank
China has banned microcredit firms from granting loans at college campuses in a bid to curb over-lending and to prevent more than 30 million students across the mainland from falling into debt traps.
“Some micro lenders have targeted college campuses and conducted inductive marketing via cooperation with technology firms,” the statement said. “These practices have induced college students to excessive consumption on internet platforms, and caused some students to fall into the traps of loan sharks.”
The CBIRC’s statement, jointly released with the People’s Bank of China, the Central Cyberspace Affairs Office, the Ministry of Education and the Ministry of Public Security, said that regulators were determined to weed out illegal practices that “harvest” college students.
03:04
What is Jack Ma’s Ant Group and how does it make money?
In China, microcredit firms, also known as small loan businesses, can offer loans at a maximum interest rate of up to four times the benchmark rate set by the central bank. They are prohibited from taking deposits and can use only their own capital to extend credit.