The system of a peer-to-peer lending may disappear in China due to the reforms being carried out by the regulators. It is likely that this market will decline significantly over the next year, Financial Times reports.
P2P lending is a system for providing loans directly through an online platform that is one of the methods to increase the availability of financial services. China is the driver of the growing popularity of P2P lending. Banking services in the country have traditionally been distinguished by low accessibility for individuals and small businesses. The requirements for the borrower are still high, and the process of registration often requires complex manipulations, while on P2P platforms you can get a loan on flexible terms through the Internet.
As a result, in the years 2014-2015, there was a sharp increase in the number of P2P platforms. The market began to grow rapidly, by the beginning of 2017 it reached $290 billion. But it turned out that among the P2P platforms there are many scammers. Regulators did not intervene until in 2016 there was a scandal with the largest at that time Ezubao platform, which turned out to be a financial pyramid. The company stole $7.3 billion from 900 thousand investors.
Then, the Banking Regulatory Commission issued rules according to which individuals cannot borrow more than about $30 thousand (200 thousand yuan) on one P2P platform, and the total amount of debt on all platforms should not exceed 1 million yuan. In addition, each P2P company should now conduct its activities exclusively through the depositary bank, and for each platform, it is only one. The platform work has become unprofitable.
After the authorities paid attention to this niche, leaders of some P2P platforms left the country. Investors organized protest actions that failed. Over the next 12 months, regulators will carry out reforms in this area, as well as prevent company executives from fleeing the country, journalists said.
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