Small Private Businesses The Future Of China’s Growth? Lenders Focus On The Sector; Jack Ma Offers 3-Minute-Loans

Alibaba co-founder and executive chair, billionaire Jack Ma’s MYbank has come out with a three-minute loan for small and medium businesses (SMB) in China, reports PYMNTS.com.

The bank uses real time payment data and a risk management system that analyses 3,000 variables before sanctioning a loan to a borrower. Latter can apply for a loan through their smartphones and receive the cash almost instantly if approved. The whole process takes around three minutes.

Non-state firms — mostly small businesses — make up about 60 percent of growth and employ 80 percent of workers in China. With the three-minute-loans, Ma is targeting these small businesses, while others are also focusing on the sector, a positive sign for Chinese economy which is facing a decreasing growth rate.

The nation’s second-largest lender launched a mobile app in September that can process loan applications for as much as 5 million yuan ($727,000) in two minutes, while Construction Bank increased its small-business lending by 51 percent last year, more than twice as fast as the industry, with defaults at just 0.3 percent. And units of Tencent Holdings and Ping An Insurance Group are both offering services similar to MYbank.

Small and medium enterprises are really the boiler room of the economy,” said Keith Pogson, a senior partner in charge of banking and capital markets at Ernst & Young LLP in Hong Kong, according to Bloomberg.

“It used to be a segment that banks thought was too difficult and too risky. But now they run their model and work out what the risks are so they feel more comfortable,” he added.

So far, the four-year-old MYbank has lent 2 trillion yuan ($290 billion) to nearly 16 million small companies, with a default rate of only about 1 percent.