DIANRONG TO AXE JOBS, CLOSE STORES

Chinese peer-to-peer lender seeking to reduce costs, comply with govt’s efforts to shrink online lending industry

DIANRONG, a Chinese peer-to-peer lender (P2P) backed by Tiger Global Management and Standard Chartered Plc, is cutting thousands of staff and closing stores, according to people familiar with the matter, as it tries to reduce costs and comply with authorities’ efforts to shrink the industry.

Dianrong planned to lay off 2,000 employees and was shutting 60 of its 90 brick-and-mortar outlets that helped verify borrowers’ identities and qualifications, said one of the people.

Disgruntled current and former employees have in recent days taken to social media to demand compensation.

The moves show that even the biggest players in China’s online lending industry haven’t been spared in the government crackdown on financial risk.

Authorities stepped up efforts to shrink the market as many platforms failed, causing financial woes for thousands of individuals.

The P2P sector, once one of the fastest-growing areas of the shadow banking system, was now estimated to be worth US$114 billion (RM464 billion), according to data compiled by Shanghaibased Yingcan Group, from a peak of US$200 billion.

“Regulators want P2Ps to cut loan balance, reduce number of investors and borrowers and in some areas force them to close down physical shops,” said Yexia Zhang, director of WDZJ Research Centre, here.

“The aftershock of the P2P shakeout continues.”

Dianrong said in an email it “continues to optimise” its structure in response to regulatory policies and industry changes.

The company had settled with unhappy former employees, it said.

Earlier last month, Chinese officials said they had frozen about US$1.49 billion of assets of more than 380 P2P lenders in an escalated investigation into illicit financing.

The operation spanned 16 countries and regions and had led to the arrests of 62 suspects implicated in P2P frauds since June.

Founded in 2012, Dianrong has raised funds from investors including from Tiger Global, Singapore’s sovereign wealth fund GIC Pte Ltd, Standard Chartered and Orix Corp.

The firm was valued at US$1.2 billion at the last round of financing and at one stage, the online lender was considering an initial public offering.

Dianrong started shrinking its business about 10 months ago, partly in response to regulatory pressure, said one of the people.

The number of Chinese P2P lenders may drop by 70 per cent this year to as few as 300, according to a Yingcan Group estimate.

Only about 50 firms would survive, analysts at Citigroup Inc predicted.