HOME Credit Group, a Czech company operating mainly in Russia and eastern Europe, has beaten some of the world s largest financial groups to become the first foreign company to set up as a consumer finance lender in China.
The company received a license from China s banking regulator this year and formally launched a pilot operation in the eastern city of Tianjin yesterday, providing small loans to consumers to buy products such as mobile phones or motorbikes on credit.
Although Home Credit has operated in China since February 2008 and has built up a nationwide network of retail stores offering credit products, it was restricted by regulations such as a requirement to partner with local institutions.
Consumer finance is really one of the last financial industries in China to develop there s virtually nothing there, Alexander Labak, chairman and chief executive of Home Credit, told the Financial Times in an interview in Beijing.
As well as giving a license to Home Credit to set up a wholly owned subsidiary in Tianjin, China s banking regulator has granted domestic groups licenses to set up pilot consumer finance operations in Shanghai, Beijing and Chengdu.
Those companies are backed by the Bank of China s Shanghai branch, Bank of Beijing and Bank of Chengdu respectively.
The average size of the 700,000 loans extended by Home Credit in China this year is only 1,800 yuan (US$270) and it is targeting the 700 million or so Chinese consumers with salaries below US$500 a month. Most of these people lack a credit history and many have never opened a bank account.
Home Credit is the largest consumer finance group in Russia and has large operations in eastern Europe, where Labak says 50 percent of consumer electronics sales are financed with the kind of non-collateralized, on-the-spot loans his group provides.
The company has ambitious plans in China, where it expects to break even by next year and be issuing more than 10 million loans annually within two or three years.(SD-Agencies)
