Alibaba broadens SME loans

Alibaba's booth at a trade expo in Beijing. Alibaba will expand its small-loans business with Chinese commercial banks. [Photo / China Daily]

BEIJING - Alibaba Group, the Chinese e-commerce giant, will expand its small-loans business with two of the largest Chinese commercial banks in March and persuade 15 lenders to join this year.

Li Feng, director of the loan division at Alibaba Financial Co, told China Daily that the company's cooperation with China Construction Bank (CCB) and the Industrial and Commercial Bank of China (ICBC) had been successful and will continue to expand.

"By the end of January, we had made loans to more than 12,000 companies, totaling 26.8 billion yuan ($4.1 billion), 90 percent with CCB of them and 10 percent with ICBC," Li said, "Our business area will expand to eight provinces and municipalities before the end of March."

According to Li, Alibaba and CCB have engaged in the small-loans business in Zhejiang, Jiangsu, Fujian and Guangdong provinces and the cities of Beijing and Shanghai. Li added that more than 90 percent of the clients of Alibaba's e-commerce platform are located in the six regions.

"Our cooperation with ICBC will see rapid development this year," Li said.

The scale of lending with ICBC will be increased to almost 10 billion yuan this year, he said, and the business area will grow beyond Zhejiang province to cover four provinces including Shandong, and three municipalities including Chongqing.

"We are making efforts to support the development of more small and medium-sized enterprises (SMEs)," ICBC President Yang Kaisheng said.

Besides loans made in cooperation with Alibaba, ICBC had issued 3 trillion yuan in loans to SMEs by the end of 2010.

Nearly 90 percent of Alibaba's loan clients choose loans requiring no collateral. In such cases, three or more companies can stand as each other's guarantors and the line of credit for each can reach up to 5 million yuan.

Li said Alibaba's e-commerce platform can help commercial banks find companies with good credit and business performance, and thus improve their efficiency in developing clients.

"An account manager usually can maintain business relations with 20 to 25 clients, so they prefer to choose those with good financial strength, but the competition can be fierce because of the limited number of rich clients," said the director.

However, the number of SMEs is always very large, although what they often need is just a small amount of working capital.

"Our platform can help those managers to find and keep relations with more than 40 high-quality clients and lend money to SMEs," Li said.

Li said Alibaba had talked with large commercial banks such as the Bank of China (BOC) and the Agricultural Bank of China, and it is probably going to persuade 15 of them to cooperate to join the initiative this year. Alibaba and BOC have carried out pilot projects in Zhejiang province.

He Qiang, a financial professor at the Central University of Finance and Economics, said small-loans lenders should be supported by large commercial banks.

"Small and medium-sized enterprises are more easily affected by risks, and so are small-loans companies or banks. So large commercial banks should play an important role in helping those enterprises," said He.

The professor also said that Dong Wenbiao, chairman of Minsheng Banking Corp, also has the intention to set up 200 small-loans companies.

Yang said that in ICBC, large enterprises' loans accounted for 6.7 percent of its capital, middle ones take up 6.57 percent, and the ratio of small ones is only 2.44 percent.

"Larger enterprises have lower risks, but SMEs' loans can make our capital more efficient, so we should be paying attention to doing business with them," said Yang.

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