The P2P lending market has developed very quickly in the Republic of China, pushed by the great demand of finance of small businesses which cannot access bank loans or other traditional finance tools. However the complete lack of regulations and an almost nonexistent education of the market resulted in poor quality borrowers and non reliable service providers.
Nevertheless the local authorities understood the potential of this industry in bridging finance to many SMEs and decided to act in order to regulate the market, thus decreasing the failure rate and offering more protection to lenders. Although the rules are not public yet, rumors say that CBRC included a capital requirement for peer-to-peer lending platforms of 30 million Yuan (approximately $ 4.8 million). This would certainly create a barrier to market entry that would keep away and push out many platforms.
Rules for P2P lending will be unveiled in June and will probably enter into effect only in the second half of this year. We will see if they will be effective in improving the quality of the market while not killing it.
Ren, D. (2015). China mulls tighter rules on booming P2P lending business. South China Morning Post. South China Morning Post.
Image credit to: Michael Coghlan http://bit.ly/1C4U7UX
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.