China P2P lender Dianrong sees market shakeout driving its growth

dianrong-chinaSINGAPORE: Chinese online lender expects to grow rapidly in the next few years, benefiting from tightening regulation driving a shake-out in the nation’s $100 billion-plus peer-to-peer (P2P) industry and pent-up demand for credit and investment.

“The market place is growing and the players are less and less. We will take over market share from other small competitors,” Kevin Guo, co-founder and co-CEO of Beijing-based, told Reuters in an interview.

Loan originations at the P2P lender, which is backed by investors including US investment firm Tiger Global and Standard Chartered’s private equity unit, more than doubled to 16.2 billion yuan ($2.3 billion) in 2016 from the previous year. matches investors with individuals and small and medium-sized businesses in real-time, with loan sizes ranging from 500 yuan to 200,000 yuan for individuals and a maximum of one million yuan for small and medium enterprises.

China’s P2P lending industry is fast becoming a source of funds for small businesses overlooked by traditional financial services institutions that prefer big borrowers with better credit history and collateral.

But a series of scandals and failures forced regulators to introduce new measures last year such as setting limits for borrowers and banning P2P firms from providing guarantees for returns to restrain the sector’s growth.

“Smaller players cannot meet the requirements from the government, so they will automatically disappear if they are not compliant,” said Guo, during a visit to Singapore.

Nearly half of the 4,000-odd online lending platforms in China were “problematic”, China’s banking regulator said in August when it unveiled the rules.

As at end-March, China had 2,281 P2P platforms in operation with outstanding loans of 920.9 billion yuan, according to industry organization WDZJ. is among China’s bigger P2P lenders which include Lufax, US-listed Yirendai and PPDAI, companies which have already raised or are in the process of raising funds to fuel their expansion plans.t

Kevin said had completed a new funding round but he declined to give details.

The P2P lender, founded in 2012 by Guo, a former lawyer, and Soul Htite, a co-founder of LendingClub Corp, is looking to grow loan origination by 50 percent annually over the next three to five years. It expects to broker about 30 billion yuan in loans this year.

“We are still a small portion of the total lending business in China. We are more flexible and cover a market that banks never touched before,” said Guo, whose firm has 3.7 million lenders and 3,500 staff, including 600 fintech engineers.