Chinese P2P lending player Dianrong gets $40m

Orix Asia Capital, a unit of the Japanese financial conglomerate, led the company’s $70 million extended Series D round earlier this year with participation from CLSA. That took the overall size of the round to $290 million, following an initial tranche in August 2017 anchored by GIC Private.

Long Hsiang Loh, Dianrong’s CEO, said in a statement that the proceeds would go towards technology improvements, strengthening the company’s asset base, and R&D of projects in areas such as cloud services and supply chain finance. The Dalian Financial Cloud Project – launched in conjunction with the government and intended to drive the use of financial technology services in local industries – is said to be the first of its kind in China.

The Dianrong platform, which provides credit information and transaction matching services for individual lenders and small businesses, was established in 2012 by Soul Htite, a co-founder of US-based Lending Club, and Kevin Guo, an intellectual property lawyer. The company differs from many Chinese P2P practitioners in that it is purely an intermediary, sourcing borrowers and then putting them in front of prospective lenders rather than behaving like a bank without a proper license. 

Dianrong has expanded into different services in recent years, offering customized lending and borrowing products. As of December 2017, Dianrong had facilitated more than RMB47 million ($7.4 billion) in loans from over four million lenders.

"China has $7 trillion of investable wealth, yet only about 15% of SMEs [small and medium-sized enterprises] have adequate access to credit. We believe marketplace lending offers more accessible, affordable and adaptable financing solutions for micro and small businesses,” Htite told AVCJ in February, noting the importance of mobile-enabled e-commerce in driving adoption of P2P services.

Dianrong has now raised approximately $550 million on the back of this growth opportunity, and the company counts the likes of Standard Chartered Private Equity, Tiger Global Management, AMTD, Northern Light Venture Capital, and South Korea’s Simone Group among its investors.

However, the latest funding comes amidst a wave of defaults in China’s P2P lending industry due to a combination of government efforts to crack down on fraud and broader restrictions on the flow of liquidity to the country’s informal banking market. Since the beginning of June, 150 P2P platforms have barred withdrawals by investors, become the focus of police investigations, or their founders have fled, according to research group Online Lending House. This compares to 217 in 2017.

The government showed it was serious about cleaning up the industry last August with the publication of a regulatory framework that featured a licensing requirement as well as bans on practices such as using new capital inflows to meet payments due to earlier investors. This was followed by curbs on consumer cash loans – also known as payday loans – due to fears of a spiraling debt problem as borrowers took out new loans to pay off existing ones.

As more platforms collapsed – there were 1,836 in operation nationwide as of June – some local governments reportedly converted sporting stadiums into administrative centers where individual lenders could file grievances. This week police locked down Beijing’s financial district to stop protests about P2P platforms.

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• Topics
• Greater China
• Expansion
• Financials
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• China
• Growth capital