Chinese Stealth Startup Qifang Wants to Bring P2P Lending to the Mainland
Chin was born in Michigan, went to Yale, and worked in banking and a few tech startups before moving to China. He founded Qifang in August, 2007. He is aiming to a launch the site in China in the spring. So far it is a real bootstrap operation. He has raised $200,000 in angel money from investors in Hong Kong and other parts of Asia, and is in the process of raising a series A financing. Qifang was inspired by existing P2P lending startups like Prosper and Zopa, but Chin is developing it with a Chinese twist. He says:
We feel strongly about China’s Internet being pretty embarrassingly all about copies. And while we were inspired by other models, we feel like we need to challenge ourselves to be different and better and fit the market. We think of it as innovation leveraging—take a good idea and make it work for China by making it different.
And it is not the fist P2P lending site in China. A broader one called PPDai offers P2P loans across many categories (see this write-up in English). But Chin thinks that starting with student loans is the better strategy in China because of the need to stay in the good graces of the government. Anything that helps promote education is popular with government bureaucrats.
It is also a big market. Chin estimates there are 25 million students in China, who pay an average tuition of $700 a year. That is $17.5 billion in potential loans.
There will also be an interesting social calculus that takes place on the site. Since each borrower’s parents will be named on the loan, failure to pay it back would result in a shameful losing of face for the parents. “Social pressure is very powerful here,” notes Chin. Default and delinquency rates will also be visible by hometowns, school, and even major. Banks don’t benefit from that sort of social pressure. Whether it will have any effect on default rates will be worth watching.
As growing economies like China develop their banking infrastructure, P2P lending has a shot of growing up with it rather than fighting against an already-entrenched way of doing things. In that sense, P2P lending might have a better shot in China than it does here.