Date
23 November 2017

Zendai thinks big about small business loans

Beijing has been calling on lenders to give more financing support to the nation’s small businesses as part of its plan to restructure the economy and sustain growth. The private sector, in particular, has heard that call and responded with much enthusiasm.

Alibaba is already on the case and looking for ways to expand its reach. Another internet titan, Tencent (00700.HK), is eyeing similar opportunities. Now conglomerate Zendai Group wants a piece of the growing lending pie.

On an edition of business talk show Boss Town, Zendai founder Dai Zhikang was challenged by a commentator on his idea to offer micro loans to smaller businesses.

“The average lifespan of a small business in China is reportedly five years. How do you manage the risk?” the commentator asked.

Dai said his company is not going to lend to companies, but to the owners of the business. Given that companies have limited liabilities, collecting a loan can be very difficult if the firm goes belly up.

“If you look at historical data, the default ratios of companies are far higher than those for individuals,” Dai said.

He also looks at risk from a different angle.

“Small businesses are risky because they rarely get continued funding support,” Dai said. His logic is that if they get proper support, they stand a far better chance of surviving business and economic down cycles.

Zendai will lend a maximum of 300,000 yuan (US$49,100) per customer to control the exposure, he added.

“Among big banks, lending to small and medium-sized enterprises involves at least 300,000 yuan per case. We are not competing with them in the same segment at all,” he said.

With an estimated tens of millions of SMEs on the mainland, Dai’s goal is to get a few million customers and handle 100 billion yuan in assets within three years.

To highlight the potential rewards of serving the mass SME population and helping the businesses grow, Dai pointed to the e-commerce success of Alibaba, which set out to be a low-cost transaction platform to help small merchants reach more customers.

– Contact the writer at [email protected]

SK

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