HK money lender eyes Tianjin

By Sophie He from Hong Kong (China Daily)
Updated: 2012-11-23

 

First Credit Limited, a licensed money lender in Hong Kong, is set to roll out its business in Tianjin, as it sees a promising future on the mainland, which is a vast market, its chairman Checkley Sin Kwok-lam told China Daily.

The company is applying for a license to establish a micro-credit firm in Tianjin and it will probably be the first of its kind in Tianjin to be wholly-owned by an overseas company, said Sin.

First Credit was established in 2006 and listed on the Hong Kong Exchange GEM Board in December 2011; its major business is to provide loans to individuals as well as to small companies in Hong Kong.

Sin said Hong Kong's micro-credit market is relatively well developed and mature, so there is limited room for significant growth, and meanwhile, the mainland market is rapidly growing.

"According to our research, the micro-credit market on the mainland is very much like the market in Hong Kong 30 years ago," he said, adding that First Credit is eager to enter this rapidly growing market with its experience from Hong Kong.

According to data released by the People's Bank of China, at the end of September, there were a total of 5,629 micro-credit companies with outstanding loans of 533 billion yuan ($85.53 billion), including 141.4 billion yuan new loans during the period.

Sin said that the company chose Tianjin to roll out its business because the Binhai New Area is one of the testing grounds in China for pilot financial policies, and the local government is open-minded and welcomes his company.

Besides, Tianjin has a population of around 13 million and its residents' incomes are growing rapidly, and so the potential of the micro-credit business there is limitless, he added.

The requirement for establishing such a money lending company in Tianjin is that the company should have at least four major shareholders, including the largest shareholder's stake not exceeding 30 percent of the venture, he said.

"But the Tianjin government is willing to make an exception for us, considering that we are a listed company in Hong Kong, and technically our firm in Tianjin will have hundreds of shareholders."

Sin believes it will get the approval it needs from the Tianjin government before the end of this year.

"Actually we have already rented a place (in the Tianjin Binhai New Area) and have aleady hired several staff," he said, adding that, "hopefully our (micro-credit) firm will be opened in the first half of next year."

Sin is ambitious about the company's business on the mainland, and despite the central government's relaxation of its monetary policy, he expects his business to thrive as small and medium sized enterprises are still finding it very hard to get loans from banks, let alone unsecured loans.

First Credit's long-term goal is to open a micro-credit firm in Beijing, Shanghai, Guangzhou, Shenzhen and Chongqing. Although currently, 100 percent of its revenue is from Hong Kong, along with the growth of its business outside Hong Kong, the revenue from the mainland will become its major income source eventually, said Sin.

The company does not have specific target companies or industries as its potential customers in Tianjin, as "the market is always changing" and the company will closely monitoring the market and choose its customers carefully.

A Tianjin resident who has a proven working record of more than two years, a small firm or store with a track record of one or two years, probably will be good enough to qualify for a loan from First Credit, said Sin.

In Hong Kong, First Credit would provide a loan of HK$500,000 ($64,510) to HK$2 million to each corporate customer or HK$10,000 to HK$1 million to each individual customer, with an annualized interest rate of over 20 percent.

The company also has a unique business in Hong Kong, which is lending money to foreign domestic helpers; the amount is usually around HK$10,000 to HK$20,000 for each person, with the annualized interest rate of over 40 percent.

Sin said that some foreign domestic helpers needed the money to pay for their agencies, which charged them a lot for helping them to come and work in Hong Kong, while others may need some extra cash during the Christmas shopping season before they head home to visit their family.

He explained that the interest rate for foreign domestic helpers is so high because the company has to take the risk that some of helpers may return to their country and never come back to repay their loans.

For the nine months ended September 30, 2012, First Credit had a net interest margin of 23.87 percent, which is relatively stable from the 23.63 percent it recorded a year ago.

sophiehe@chinadailyhk.com