Bank­ing reg­u­la­tor en­cour­ages growth of con­sumer lend­ing

China Daily (Canada) - - BUSINESS - By JIANG XUEQING jiangx­ue­qing@chi­nadaily.com.cn

China’s bank­ing reg­u­la­tor will en­cour­age the launch­ing of more con­sumer fi­nance com­pa­nies while help­ing them im­prove com­pre­hen­sive risk man­age­ment.

For ex­am­ple, with reg­is­tered cap­i­tal of 300 mil­lion yuan ($43 mil­lion), Bao­tou Baoyin Con­sumer Fi­nance Co Ltd opened for busi­ness on Dec 29 in Bao­tou, the In­ner Mon­go­lia au­tonomous re­gion. Baoshang Bank Co Ltd, a Bao­tou-based mid-sized com­mer­cial lender, was among the com­pany’s three founders, hold­ing 73.6 per­cent of the stake.

Liu Xin, chair­man of the com­pany, said it aims to become an on­line con­sumer fi­nan­cial ser­vices provider for the younger gen­er­a­tion, of­fer­ing prod­ucts for var­i­ous sce­nar­ios.

Also, Bank of Shang­hai Co Ltd re­ceived in Novem­ber reg­u­la­tory ap­proval to set up a con­sumer fi­nance com­pany of which it will hold 38 per­cent. Bei­jing-head­quar­tered Huaxia Bank Co Ltd also an­nounced that its board of di­rec­tors ap­proved es­tab­lish­ing a con­sumer fi­nance com­pany, as did Bank of Jiangsu Co Ltd.

Since the State Coun­cil agreed to launch a trial pro­gram on con­sumer fi­nance com­pa­nies in four cities, in­clud­ing Bei­jing and Shang­hai, in 2009, the China Bank­ing Reg­u­la­tory Com­mis­sion has ap­proved the es­tab­lish­ment of 17 con­sumer fi­nance com­pa­nies.

As of the end of Septem­ber, to­tal as­sets of con­sumer fi­nance com­pa­nies reached 107.72 bil­lion yuan in China. Their to­tal loan bal­ance was 97.03 bil­lion yuan and the av­er­age non­per­form­ing loan ra­tio was 4.11 per­cent. These com­pa­nies lent an ac­cu­mu­lated amount of 208.44 bil­lion yuan to 24.14 mil­lion clients, ac­cord­ing to the CBRC.

Dur­ing the first three quar­ters of 2016, loans be­low 5,000 yuan with­out pledges or guar­an­tees ac­counted for 60 per­cent of the to­tal pro­vided by con­sumer fi­nance com­pa­nies.

Mao Wanyuan, di­rec­tor of the CBRC’s Non-bank Fi­nan­cial In­sti­tu­tions Su­per­vi­sion De­part­ment, said at a news con­fer­ence in mid-De­cem­ber that con­sumer fi­nance com­pa­nies ef­fec­tively im­prove the con­sump­tion power of mid­dle and low in­come groups by of­fer­ing small loans at a low thresh­old.

“Cur­rently, con­sumer fi­nance com­pa­nies are de­vel­op­ing steadily in gen­eral but they still lack ex­pe­ri­ence han­dling risks. Our main goal at present is to lead these com­pa­nies to im­prove their com­pre­hen­sive risk man­age­ment ca­pa­bil­ity, to build risk aware­ness and a sense of pru­den­tial de­vel­op­ment, and to ex­plore di­verse mar­ket she said.

In ad­di­tion, con­sumer fi­nance com­pa­nies are fac­ing in­ten­si­fied com­pe­ti­tion from a grow­ing num­ber of mar­ket par­tic­i­pants, such as peer-to-peer lend­ing plat­forms and e-com­merce com­pa­nies.

Dur­ing the last few years, con­sumer fi­nance com­pa­nies have ex­panded ser­vices to third-and fourth-tier cities. In the mean time, they stepped up the ex­plo­ration of in­ter­net tech­nolo­gies to bet­ter serve con­sumer fi­nance, build­ing a net­work of off­line branches sup­ple­mented by on­line chan­nels, Mao said. op­por­tu­ni­ties,”

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