P2P Lending in China

I have been fascinated and in love with the concept of P2P (peer-to-peer) lending for over 3 years, including writing numerous business plans, studying various models across different countries, working in what has become the largest and most successful peer-to-peer lending company in the world based in China, to now, founding my start-up www.pandai.cn, which is an online P2P lending company that is the only destination in China that will allow you to build credit.

First, I would like to address the overall state of the industry in China from my experiences and point-of-view. A common misconception when viewing China or in fact, any country, is banks are the typical means to financing. This is especially not true in China. If we see that bank lending is capped at 7.5 trillion RMB a year, and then notice from several news and research reports that estimate P2P lending (民间贷款) to be between 4-8 trillion RMB a year (I believe it is leaning towards the 8T). With the majority of bank lending going to state-owned enterprises, MNC’s, mortgages and other forms of collateralized loans, since bank credit products are extremely limited as compared to other developed economies; consumers are forced with no choice but to turn to non-bank financing alternatives. A very small percentage of their loans are given to small businesses or typical consumers, and if loans are granted, they’re structured indirectly via guarantee companies. It’s a known saying that to get a loan from a bank, you need to prove you have money to get money, thus defeating the purpose, not to mention, service amongst banks is generally sub-par across the board. For example, a friend wanted to buy a new car by taking a loan from the bank, which would’ve taken 2-3 weeks to process and in that time she would’ve lost the booking on the new Volkswagen. So, she paid for the car in cash and when she went back to the bank to ask for the loan, they would not process it, as she needed to prove use of funds. In short, the inefficiency, risk averseness, strict policy and lack of expertise has created this huge underground private lending market.

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