Fenqile, one of China’s leading student micro-loan startups, has sealed $235 million USD in funding, the company announced on Wednesday. The injection is part of a larger D series round that has not yet closed, they noted.

Founded in August 2013, Fenqile lends users small sums of money for things ranging from electronics to skill training programs. The service is mostly target at students and offers budget short and long-term installment plans.

The platform now claims to have over 10 million users from user demographics outside of students. Data from the company shows that its sales for the first half of 2016 have hit 10 billion RMB ($1.52 billion USD).

The financing comes after an undisclosed amount of strategic C round from JD that is received in March last year and $100 million USD B round led by Digital Sky Technologies. Previous investors of the company include K2VC and Sequoia China.

The Wall Street Journal reported in October last year that Tencent was in talks with the company for potential investment, though the internet giant is not included in its confirmed investor list. The round was led by Huasheng Capital, private capital firm established by China Renaissance Partners, and CoBuilder Partners.

The company has issued its asset-backed securities on Shanghai Stock Exchange this March. The firm did not respond to TechNode’s inquiries on IPO plans.

Luo Min, CEO of Fenqile’s top rival Qufenqi, said in an internal letter that they are planning an local IPO. Qufenqi received an undisclosed amount of financing this January after landing $200 million USD investment led by Ant Financial.

The Dark Side Of A Booming Market

The budding lending industry, which taps the growing spending power of China’s new generation, has witnessed booming growth in the country. The growth has also brought about concerns over the industry’s integrity.

Local media revealed in a recent investigation that the loans can easily overwhelm users who misunderstand the terms of the service. They spoke to one Chinese university sophomore student who found themselves in 13,000 RMB debt for a 6,000RMB loan from Qufenqi after allowing it to overdraw by 14 months.

Under the Qufenqi’s previous contract, users have to pay a daily penalty of 1% if they failed to pay back the installment on time, an incredibly high rate considering the daily interest for credit cards is only 0.05%. The company lowered its penalty rate to 0.05% this May.

Users choose such lending platforms over credit cards because it is difficult for university students who don’t have stable incomes to apply for credit cards. On top of that, credit cards have a very low penetration rate compared to U.S. rates.

Emma Lee (Li Xin) was TechNode's e-commerce and new retail reporter until June 2022, when she moved to Sixth Tone to cover technology and consumption. Get in touch with her via lixin@sixthtone.com or Twitter.

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