Boston, MA 03/03/2014 (wallstreetpr) – China Commercial Credit Inc (NASDAQ:CCCR), the first Chinese microfinance company to list in the United States is planning a host of innovative strategies to increase its market share. China has also taken some steps to regulate private lending and this will boost the company’s prospects.
China Legalizes Private Lending:
In a major boost to China Commercial Credit Inc (NASDAQ:CCCR), China has launched a pilot scheme in Wenzhou to legalize private lending. The Wenzhou Private Financing Regulation opens the underground lending activities and brings transparency in their activities. A severe liquidity crunch in these underground lending companies in 2011 had caused credit crises in the city. Though there are 8,000 microcredit companies in China, they have a very small role in China’s shadow banking system, with just RMB800 billion in outstanding loans. The total assets in the shadow banking sector is estimated to be around RMB46 trillion.
The Innovative Strategies:
When China Commercial Credit Inc (NASDAQ:CCCR) launched its IPO, there was very weak investor appetite in the U.S. It could mop up only $809 million through its IPO. However, the situation has improved and the company is planning a second offering. The risks are exaggerated as highly risky loans are not widespread. These loans are secured with real assets as collateral against 80-90% loans in the U.S. The average loan size is also very small. The company’s average loan size is just $333,000 (RMB 2 million) and the annual interest rate at 14.6%.
China Commercial Credit is also venturing into peer-to-peer lending. Peer-to-peer (P2P) lending allows for matching the financing needs of corporate borrowers with lenders with the loans being guaranteed by microcredit firms. The company will be setting a dedicated P2P platform soon. It is also considering acquisitions to boost its market share. Online credit offers several benefits. The company is not restricted to the province of registration. The interest cap is also higher, online lending is subject to annualized interest rate cap of 24% against 18% for microcredit firms.