Lenders brace for accelerated growth

The International Monetary Fund's decision to include China's renminbi in its Special Drawing Rights basket will generate more opportunities and present challenges to China's peer-to-peer or P2P lending market, said market insiders.

Inclusion of the yuan in the IMF's SDR basket could mean finance firms may see more capital inflows and investor visits as the market is increasingly opening up to overseas capital and cross-border investment, said Fu Donghai, chairman of Beijing-based ComCredit Ltd, an online financial services firm.

Competition between domestic online lenders and their overseas counterparts will likely turn fiercer as the latter are offering increasing number of yuan-denominated products, which appeals to domestic high networth individuals or HNIs, said Fu.

China's P2P financial services are in great demand and the market size has been expanding. They extended 313.7 billion yuan ($49.32 billion) in loans in September, up almost 15 percent month-on-month and 490 percent year-on-year.

The amount is expected to exceed 400 billion yuan by the end of this year, according to data of Shanghai-based Yingcan Consultancy Ltd, which focuses on research and consultancy services for P2P lending through Internet.

Bigger players in the market have already been seeking to access more resources from capital markets through fund-raising and initial public offerings.

For instance, Yirendai, an online consumer finance marketplace and a wholly owned subsidiary of Beijing-based CreditEase Ltd, is planning to raise $100 million through its IPO on the New York Stock Exchange.

Set up in 2012, Yirendai currently has more than 7 million registered users and has facilitated more than $10 billion worth of lending transactions.

Yirendai's American Depository Shares will likely be listed on the NYSE under the "YRD" symbol. If the IPO is successful, Yirendai would become the first Chinese P2P lender to be listed on the NYSE. It will start trading sometime this month, according to the company's disclosures to the stock exchange.

Shanghai-based Dianrong.com is also seeking up to $500 million in funding, which could be the largest investment in the sector as the company plans to expand overseas, according to Soul Htite, its CEO.

Another Shanghai-based firm, Shanghai Lujiazui International Financial Asset Exchange (Lufax), was valued at nearly $10 billion by investors earlier this year. It is also preparing for its IPO, which could take place in the second or third quarter of 2016, and net up to $5 billion, according to a Xinhua report.

Listing and fund-raising by P2P players are set to increase in 2016 as the market expands, said analysts.

Experts said that platforms need to enhance their abilities in many aspects when the market expands and opens up, particularly in terms of risk management, operational capacities and ability to win investors and borrow.

"Growing non-performing loans and unstable financing platforms have been hampering the growth of inclusive financial services in China. To develop in a more healthy way, it is essential to educate investors, and introduce policies and regulations to help market develop in a healthy and sustainable way," said Ma Jun, chief researcher with Yingcan Consultancy Ltd.

Market insiders said currently most of the P2P services are provided to borrowers and investors in first- and second-tier cities including Beijing, Shanghai and Shenzhen, and coastal provinces with relatively higher average disposable income. Demand for inclusive financial services will increase rapidly in remote regions, said P2P professionals.