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FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.
Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time.
As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.
Introduction
Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services
Guo Shuqing, the Chairman of CBIRC, spoke at the 2020 Singapore FinTech Festival and explained that the operating P2P online lending institutions were cleaned up from the market during the past few years. As of November 2020, the number of operating P2P platforms has decreased from 5000 to zero, which means that the P2P business has now been expelled from the Chinese market.
Notwithstanding the above, there are still licensed and specialised companies that are providing relevant services. Generally speaking, the loan-giving and brokerage businesses are carried out by microlending companies; the factoring business is carried out by commercial factoring companies; the finetrading business is carried out by the financial asset management companies.
Legal affairs
Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above
Firstly, engaging in the microlending business requires a special license. Currently, there are no nationwide laws and regulations regarding market access of microlending companies, and relevant rules are issued by the local authorities. Thus, FinTechs in this area should decide on the operating location first and then check the local rules for further instructions. Generally speaking, the market access requirements for microlending companies are financial requirements. For example, in Shenzhen, the paid-in registered capital for the proposed microlending company registered as “limited liability company” shall be not less than RMB100 million (equivalent to approximately USD15.7 million or EUR14.2 million) (RMB200 million (equivalent to approximately USD31.5 million or EUR28.4 million) for “company limited by share”), and its main shareholder shall have a net asset not less than RMB0.1 billion (equivalent to approximately USD15.7 million or EUR14.2 million) and an asset-liability ratio not higher than 70%.
Secondly, engaging in the factoring business requires a special license. As well as for microlending, the applicants for factoring should also check the local rules to get knowledge of the market access requirements. Generally speaking, such rules will include the financial requirements. For example, the paid-in registered capital for a proposed factoring company shall be not less than RMB50 million (equivalent to approximately USD7.9 million or EUR7.1 million) in Shanghai.
Last, dealing of the non-performing assets requires a financial asset management license (AMC license). The market access requirements for the AMC license are quite strict, including (i) the provincial government will in principle only establish/authorise one (1) local AMC company to engage in the batch acquisition and disposal of non-performing assets of financial enterprises within the scope of the province; (ii) the minimum paid-in registered capital shall be RMB1 billion (equivalent to approximately USD157 million or EUR142 million).
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