Micro - Lending Industry in China

In China, Micro-lending firms are legally supported by the Chinese government to support undervalued individuals and SMEs who are largely excluded from the national banking system. While in the US the hard-money lenders have similar functions, Chinese micro-lending firms are much more important players in the country’s finance industry. The number of micro-lending companies has expanded from 100 in 2008 to 8791 in 2014, at the same time loan balance in total increases from $1.45 billion to $151.85 billion. However, this industry faces the challenge of the rise of P2P lending. Micro-lending firms are forbidden to absorb deposit, while P2P firms with good marketing skills acquire a large number of investors – and their money - to the internet platforms. In fact, many micro-lending firms are building their own marketplace or cooperate with P2P platforms to expand their businesses.

Micro-lending industry in Wenzhou, a second-tier Chinese city, is a case in point. The number of company has increased from 26 in 2011 to 45 in 2014. And the average growth rate of loan balance is 13.6%.
Loan Balance - Wenzhou
Meanwhile, the proportion of micro-lending loan balance in total loan achieves 1.96%.
The Proporation of Micro
It is notable that a number of foreign companies are attracted to China to set up their own micro-lending companies branches, such as Temasik from Singapore. Temasik has set up Fullerton Credit with $48.4 million registered capital in Chengdu in 2008. Till the end of 2014, Fullerton Credit has opened 32 branches in Chengdu, Hubei and Chongqing, and the registered capital has expanded to $269 million. There are also Western capital management companies seeking investment opportunities from first rate Chinese micro-lending companies.