SHANGHAI - Billionaire Jack Ma's online bank is leading a quiet revolution in the way China lends to small businesses, taking aim at a credit bottleneck that has held back Asia's largest economy for decades.
For China's US$13-trillion economy, which expanded at its weakest pace since at least 1992 last quarter, the implications could be profound. Non-state firms - mostly small businesses - account for about 60 per cent of growth, employ 80 per cent of workers, and have been disproportionately squeezed by a more than two-year government crackdown on shadow lenders.
"Our legal framework and regulatory environment - which raise fewer privacy concerns - make it easier to generate a huge amount of data and thus provide an unparalleled testing bed," Mr Sheng said. The upshot of more information is a loan approval rate at MYbank that is four times higher than that at traditional lenders, which typically reject 80 per cent of small-business loan requests and take at least 30 days to process applications, according to Mr Jin, who plans to double MYbank's roster of borrowers in three years. He said the Hangzhou-based firm's operating cost per loan is about 3 yuan, versus 2,000 yuan at traditional rivals.
"It's a profitable business as long as you can keep the risks in check," said Mr Zhang Gengsheng, a vice-president at Construction Bank in Beijing."We had suffered huge losses in the past, with a bad-loan ratio running at 8 per cent. But now, we're back in the game."
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