Internet savvy operators appear to be making real money in the virtual world of Internet based person-to-person lending.  According to unofficial sources there are an estimated 100 micro lenders operating in China with outstanding loans of 18 billion Yuan (US$ 2.8 bn) in total.  China’s first such lender was launched in 2006.

The attraction of this market is that the entry barrier is relatively low and the market is not yet regulated.  A company can be set up as an IT Consultancy with a capital of just a couple of million Yuan.  In this person-to-person market the minimum loan is 50 Yuan with a 20% yield for the investor.  The current growth rate for this type of micro lending is estimated to grow at an annual compounded rate of 225%. 

The South China Morning Post raised the question whether this kind of lending business was here to stay?  We (BIIA) can only assume it will stay until it will get out of hand like negative experiences in Bangladesh and India.  Once the first scandals of high handed collection methods hit the press, the People’s Bank of China may step in to regulate this emerging industry.

Source:  South China Morning Post