Hexindai invests in Musketeer seeking new opportunities beyond P2P fraud spooked China

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Chinas leading peer-to-peer (P2P) lending platform Hexindai announced today it will acquire a 20% equity stake worth approximately $1.6 million in Indonesian Musketeer Group Inc., an online lending platform that offers consumer loans.

This acquisition marks Hexindai’s first cross-border investment as well as its first step to explore overseas opportunities in new high-growth markets. It also comes at extremely turbulent times for China’s P2P industry.

Founded in 2014, Hexindai is a P2P lending platform that introduces borrowers to investors. It was part of a wave of Chinese online lending platforms that have experienced a boom in recent years as local commercial banks are reluctant to supply loans to middle-class individuals. The company went public last year in the US along with a raft of microlenders such as Qudian, Lexin, PPDAI, and others.

Hexindai’s acquisition is one of the rare good news in China’s P2P lending market. The RMB 1.3 trillion-worth sector was hit by a series of blows recently as hundreds of platforms imploded. The life savings of thousands of mom-and-pop investors were wiped out with protests erupting in Beijing over the online lending crisis.

The rise and fall of China’s online P2P lending

The crisis sent the share prices of Chinese online lending companies down sharply. Hexindai’s price dropped from its IPO price of $12.66 to $8.22 per share on August 14, while Qudian’s shares plummeted far below its IPO price of $29.18 to $6.77 on the same day.

Due to the high risks, online P2P lending has become one of the most regulated sectors in China. Since last year, Chinese financial watchdogs have stepped up efforts with the government requesting from provincial regulators to suspend issuing licenses to any new online microlending firms last November.

Despite issues, some P2P lending platforms seem to be doing well.  Last week, Dianrong announced that it has raised $40 million of funding from Dalian Financial Investment Group Co. Ltd. The current round will increase the company’s total funds raised to date to over $500 million.

Given China’s worsening online lending environment, it’s no surprise that Hexindai plans to seek more opportunities in the global market.

“Indonesia’s youth demographics and economic development create a significant opportunity for us to benefit from the online lending boom in Indonesia. Musketeer’s corporate values and strategy are closely aligned with ours, which I believe will facilitate a close relationship that will allow us to share our experience and support them as they grow,” said Xinming Zhou, Chief Executive Officer of Hexindai.

Indonesia’s solid internet infrastructure and growing mobile penetration rate will support the long-term sustainable growth of the online lending industry. In addition, the Indonesian government has introduced clear and definitive regulations that govern the industry and welcomes both foreign and domestic investors, according to the firm.