Internet lending is making waves again. On November 2, the central bank and the China Banking and Insurance Regulatory Commission publicly solicited opinions on the “Interim Measures for the Administration of Online Small Loans (Draft for Comment)” (hereinafter referred to as the “Measures”), including inter-provincial business, external financing, loan amounts, and joint lending There are five restrictions on the proportion of capital contribution, controlling shareholders and registered capital.
Everything seems to be a sign. In August of this year, the Supreme Court’s red line for private lending interest rates dropped from 36% to 4 times the LPR one-year interest rate. According to the 3.85% LPR one-year data released by the Central Bank on October 20, the current red line of interest rates for non-financial institutions is 15.4%. At that time, the “IT Times” reported that small online loan companies may be affected, and the clearing tide may be inevitable.
Now, under the five yoke, online small loan companies are included in the supervision for the first time. All the glitz is drawn to a halt, and the chaos of “instalment loans” and “credit loans” that once flooded may slowly disappear.
One billion yuan threshold, Jiucheng online loan platform is not compliant
The public’s intuitive experience of online microfinance may be reflected in the introduction of new businesses by Internet giants such as Baibai, Weibei, and JD Gold Bullion in recent years. But in fact, online micro-credit platforms have been proliferating in recent years, and complaints about “being loaned online” have also emerged: “** financial services, compulsory payment” “** education, induced me to loan tuition with high interest” “The mobile phone is lost, and the scammer uses my information to loan tens of thousands”…
The basic consensus in the industry is that once the Measures are formally implemented, online microfinance business will usher in a round of major adjustments, and large Internet companies that expand through online microfinance business will be significantly impacted, because even large companies will It does not necessarily meet the requirements of the Measures.
According to the query on the enterprise, the companies corresponding to the Internet microfinance of Lianbai, Weiweidai, and JD Gold Bar are Ant Shangcheng Microfinance, WeBank, Chongqing Liangjiang New District Shengji Microfinance Co., Ltd., and their registered capitals are respectively 4 billion, 4.2 billion, 1.6 billion, settled in Chongqing and Shenzhen.
Another small loan company based in Chongqing is Xiaomi, with a registered capital of US$450 million (equivalent to approximately RMB 3 billion).
Although citizens of Mordu can easily obtain loans from borrowers and millet loans, if they follow the “Measures”, these two companies do not have the qualifications for cross-provincial exhibition. The “Measures” set the registered capital threshold for cross-provincial business at 5 billion yuan.
According to Huang Dazhi, a researcher at the Suning Institute of Finance, “In the current market, there are only 5 companies in the entire microfinance industry with more than 5 billion registered paid-up capital.”
Inter-provincial operation means the ambition of scale to bring benefits. However, the “Measures” require that 5 billion yuan is a one-time paid-in monetary capital.
Even if it is the second best thing and only does regional business, the “Measures” also provides a requirement of 1 billion yuan in registered and paid-in capital. “The threshold is relatively high.” Huang Dazhi said.
According to the “Guiding Opinions on the Pilot Program of Small Loan Companies” issued in 2008, the registered capital of small loan companies shall be all paid-in currency capital. The registered capital of limited liability companies shall not be less than 5 million yuan. Less than 10 million yuan. According to a research report by Northeast Securities, as of the end of December 2019, there were 9,074 microfinance company legal entities nationwide, with a paid-in capital of 947.8 billion yuan and a loan balance of 104.3 billion yuan.
However, once microfinance companies touch the Internet, the threshold is greatly increased.
According to the data provided by the enterprise search, there are more than 300 online microfinance companies operating normally, of which less than 20 have a registered capital of not less than 1 billion yuan, which means that 90% of online microfinance companies still fail to comply with the supervision. Claim.
Even if the threshold of 5 billion registered capital is passed, new troubles of (inter-provincial) online small loan companies will follow.
The “Measures” restricts the business geographical scope of online microfinance to be consistent with traditional offline microfinance companies, and requires the same investor and its related parties, the same investor and its related parties, and persons acting in concert as major shareholders to participate in cross-provincial shares The number of small online loan companies shall not exceed two, or the number of controlling inter-provincial small online loan companies shall not exceed one.
According to data from Everbright Securities, the number of online small loan licenses at this stage is about 250, of which about 100 are concentrated in Chongqing, Guangdong and other places.
What worries Huang Dazhi is that inter-provincial small loan companies are already infinitely close to consumer finance in terms of functions. However, according to the consultation draft, most small loan companies have to return to local operations. There will be many uncertainties, such as local Taxation, supervision, market, etc., “In the future, most online small loan companies will lose their cross-provincial operating qualifications, and most of the cross-provincial operations of online small loan companies will disappear and degenerate into provincial small loan companies. Of course, some small loan companies It is still valuable in individual provinces and cities.”
In the opinion of some industry insiders, the requirements for restricting cross-regional operations are borrowed from the online car-hailing model and the banking model. “To start business in any province, you must obtain a local license and strengthen management on the capital side. There are not too many online microfinance loans that can be approved for cross-provincial operations, and funding is not a problem for leading companies, and their market share is expected to further increase.” Chen Bo, associate researcher at the Central University of Finance and Economics, told ” IT Times reporter.
Joint lending is limited to leveraged cash cows have to “go slowly”
The entry barrier is only the first step in regulation. More requirements fall on the business operations of online microfinance.
The “Measures” stipulate that the balance of a single household small loan shall not exceed 300,000 yuan or 1/3 of the average annual income of the past three years, whichever is lower. The China Banking and Insurance Regulatory Commission has realistic considerations.
Since small loan platforms often correspond to long-tail users with lower incomes, there are currently 600 million people in China with a monthly income of only 1,000 yuan, and the actual loan amount for these people is only 12,000 yuan. The latter quota can benefit their loan demand while preventing borrowing risks. According to data from Everbright Securities, the current average household balance of Ants borrowing is between 10,000 and 30,000.
On the other hand, the lower limit makes the daily interest-bearing online small loan industry aware of future risks.
“This trick may be the most deadly for online small loan companies.” A former mutual financial practitioner pointed to the restrictions on the joint loan business of small loan companies in the Measures.
At present, online small loan companies mainly adopt self-operated, joint loan, and loan assistance models. The self-operated model generally uses its own funds to lend through leverage, and the company earns interest margins.
In addition to the enterprise itself, the funder of the joint loan is also the bank. The income model is the loan spread and service fee corresponding to the proportion of capital contribution. Loan assistance is an asset-light model, in which financial institutions contribute funds to earn service fees.
The core reason for the rise of the joint loan model lies in the mismatch between the flow and the distribution of funds. Joint loans can help optimize the allocation of resources in the industry. The common mode is that Internet companies with huge flows invest 10% (or less) and have funds but no The commercial bank of the appropriate lender is responsible for the remaining loan ratio, and the two jointly lend to Internet users. As a result, Internet giants can use less of their own funds to leverage 10 times the scale of lending. “IT Times” found in the previous test of 30 financial apps that the online loan microfinance companies under the giants such as Suning Consumer Finance, Baidu Youqianhua, and Bibai are all joint lending.
Shangcheng Small Loan (borrowing) and Chengde Bank jointly issued loans, JD Gold Bullion and Ningbo Bank jointly issued loans. Source/Network
Taking Ant as an example, the prospectus shows that as of the first half of this year, Ant Group has contributed a credit balance of 2,153.6 billion yuan, of which 98% of the funds came from cooperative banks and the issuance of ABS.
Photo Source/Huajin Securities
ABS (asset securitization financing) is another method of leveraged financing. For example, a small online loan company has 100 million yuan in funds, lends this part of the funds to users, and then packages the loan into ABS, which is issued to Capital market financing received 300 million yuan. After that, the 300 million yuan of funds will be loaned to users for refinancing. Such a cycle can get higher capital and loan scale.
The multiple cycles of ABS have simultaneously amplified the risks of small loans. Therefore, in September of this year, the China Banking and Insurance Regulatory Commission required that the balance of online micro-loans through bank loans, shareholder loans, etc., should not exceed 1 times their net assets; the balance of funds received through issuance of bonds and asset securitization products should not exceed their net assets. 4 times the assets, that is, the leverage ratio is 500%.
In other words, in the past, when combined loans and up to 5 times ABS were superimposed, a small online loan company with a capital contribution of only 10% could leverage at least 50 times the leverage. The data of Kaiyuan Securities even show that some online small loan companies contribute as little as 1% to 2% in joint loans, and their leverage ratio exceeds 100 times.
A large number of top platforms have no loan contracts
The “Measures” stipulate that in a single joint loan, the proportion of capital contribution of a small online loan company shall not be less than 30%. According to this calculation, the leverage ratio can be reduced to 12-16 times.
“This is mainly to avoid the increase and amplification of market risks.” Yin Zhentao, deputy director of the Law and Finance Research Office of the Institute of Finance of the Chinese Academy of Social Sciences, told the IT Times reporter that this article has a greater impact on leading companies such as Ant and JD. Leverage must digest the stock, and new business is subject to many restrictions, which will inevitably affect its profits.
The prospectus shows that as of the first half of this year, small and micro loan business revenues, mainly Huabei and Lianbai, accounted for as much as 39% of the income, which is the cash cow business of Ant Group.
Picture Source/Ant Group Prospectus
However, under the new regulations, the reduction of leverage and quotas will make the cash cow business sustainable, a mystery.
What is more worrying is that when a reporter from IT Times tested a number of online microfinance joint loan products, he found that many top online loan platforms did not provide contracts before lending, and some even provided contracts, but they were not included in joint loan products. Clearly mark the proportion of small loan companies and financial institutions. In other words, ordinary borrowers cannot perceive whether the product is compliant, and the regulator cannot judge the joint ratio of each transaction, and thus cannot judge whether the product has liquidity risk.
In fact, although regulatory authorities have issued many regulations that restrict platforms in recent years, it is difficult to judge whether many regulations are implemented from the perspective of consumers and lenders.
Transformed to consume money by the “aviation control” giant
The aforementioned online lending industry insiders seem to have a little more pessimistic prediction about the future of online microfinance. The rest of the government knocked on it, which means that most online small loan platforms will become a thing of the past.
However, the “Measures” is still a draft for soliciting opinions, and there is a one-month time for soliciting opinions and feedback, and there is still some uncertainty in the official version.
In addition, the new regulations also stipulate a transition period for rectification and reform. Before the implementation of the new regulations, small loan companies that have been approved to engage in online small loan business should fully meet the requirements within one year; Small loan companies that have cross-provincially engaged in online small loan business must fully meet all regulatory requirements within the three-year transition period.
However, if it is implemented in accordance with the draft for comments, will online small loan companies still have a chance to survive?
Yin Zhentao said that most of the Internet small loan companies are technology companies, especially some of the larger technology companies. They have capital and shareholder background and will not exit. As long as the non-compliant business is cleaned up, it is actually beneficial to the development of large companies. Yes, “smaller online microfinance companies do not have that much business, and may leave the market, and the market will show a trend of higher concentration.”
In the opinion of most people in the industry, what small loan companies can do is to comply with regulatory requirements. “Even conservative estimates, at least 50% of online small loan companies will exit the market after a three-year transition period.” Huang Dazhi said.
But when the joint lending business is limited, what new changes may be made by online small loan companies?
It is considered a possibility for online small loan companies to develop loan assistance business and avoid the limitation of joint loan capital contribution ratio. In fact, Internet companies also have their own loan assistance business.
However, since the income of loan assistance services is lower than the joint loan business, in the view of Everbright Securities, if the profit margin is to be maintained, the online small loan companies need to fight for the amount.
Will the wind of regulation blow to the loan assistance business? It seems still unknown.
The transformation of small loan platforms into consumer finance is another way out. Compared with licensed consumer finance companies, the minimum registered capital requirement is 300 million yuan, which is lower than the minimum threshold of 1 billion yuan for online small loans.
From May 2019, Baidu, Weibo, Xiaomi, and Vipshop have jointly established or invested in consumer finance companies with financial institutions holding consumer finance licenses to form consumer finance companies. This seems to be a foresight.
Of course, some people in the industry have pointed out a path for online small loan companies, such as finding a capital partner, completing registration, and evaluating joint lending. In fact, they can only develop in an orderly manner if they meet regulatory requirements.
“It’s like air traffic control now. The top online microfinance business, including lending and JD gold bullion, cannot fly. Only when they meet regulatory requirements can they walk steadily.” A person from the Zhejiang financial regulatory agency told the IT Times reporter. He believes that the long-tail user borrowing demand corresponding to online microfinance still exists, and that microfinance will not disappear in the future.
Author/IT Times reporter Sun Pengfei Pan Shaoying
Picture/Huajin Securities Everbright Securities on Pixabay