CreditEase and the Growing Demand for Microloans in China

This blog post provides background information on CreditEase. Ning Tang, founder of CreditEase, presented at the recent After Hours Seminar, "Overview of Microfinance Markets and Investment Opportunities in Russia and China."

The Bank of China recognizes the importance of microfinance as a tool to achieve greater financial inclusion. By the end of 2011, 20 village banks are expected to be operational in China, providing Chinese rural markets with “convenient, flexible, transparent, affordable and efficient financial products and services.”  China’s small-scale credit companies have issued new loans worth a total of 89.4 billion yuan (US$14 billion); there are 3,366 micro-financing firms; and outstanding small credit has reached 287.5 billion yuan (US$45 billion). According to Xiao Gang, Chairman of the Board of Directors of the Bank of China, there are 263 million “unbanked” adults in China (people who do not use formal financial services to save or borrow).

CreditEase is China’s first, and now the biggest, peer-to-peer microcredit platform working with the unbanked in China. Ning Tang, founder of CreditEase, presented on his organization at the After House Seminar, "Overview of Microfinance Markets and Investment Opportunities in Russia and China."

Ning Tang created CreditEase in 2006 using a model similar to the Grameen Foundation, but applied to the Chinese countryside. CreditEase is a peer-to-peer lending company that serves as a middleman rather than a lender. CreditEase also provides services such as wealth management, credit risk assessment and management, credit data integration, microfinance investment, microfinance consultancy and transaction, and a public-service microfinance rural assistance platform. In April 2010, the internationally recognized investment institution KPCB invested US$10 million in CreditEase (KPCB has invested to Google, Amazon, AOL, etc). In September 2010, CreditEase was elected as a Directing Unit of the China Microfinance Alliance. At the beginning of 2011, CreditEase joined the China Inclusive Finance Working Committee and became a strategic partner. In addition, Tang serves on the Board of Directors for the China Association of Microfinance (CAM). CAM was created in 2005 and as of December 31, 2010, there were 92 formal members, covering 27 provinces and cities across the country.

In an interview given to BusinessWire, Tang noted that interest rates and service fees charged by CreditEase amount to about 25-40 percent of financial costs of microlending with a default rate of only 2 percent. Tang emphasized that successful operations and a low default rate are very helpful in rebuilding trust that has been shaken in China. In just five years, CreditEase has expanded its operations to 30 cities, while managing 50,000 relationships between lenders and borrowers. Tang also pointed out that demand for microloans in China is much greater than supply. There are more than 50 million micro-entrepreneurs in China and about 200 million poor Chinese in rural areas who can benefit from microloans. Each year there are also 7 million new college graduates who would benefit from these services.