Back in February we wrote about the increasing popularity of P2P lending in China. Today we are profiling another Chinese peer-to-peer lender called Qifang. Qifang is a new specialized lending platform that connects Chinese university students with lenders who can help fund their educational expenses. Lenders can be institutions such as banks, companies, NGOs, or individuals. Lenders can also be philanthropists that help finance educational expenses through donations. In this aspect, Qifang’s model builds on that of Kiva and Propser in the West.
However, upon closer observation we realize that Quifang’s model does not simply build on that of other P2P lenders; it outright mimics them. Upon submitting an acceptance notice or student ID, Qifang borrowers create a profile that has striking similarities to borrower profiles on Prosper, including a link to “endorsements from friends” (Prosper's special tool for leveraging social networks). Even more original is that borrowers set their own interest rates and terms allowing lenders to bid on borrowers based on the interest rates they set.
And while I am looking through Qifang’s website I keep trying to put my finger on something else that is giving me déjà vu but what could it be? Ah, yes, the site’s design and colors are near mirror images of Zopa’s warm, orange stripe beneath a thinner black stripe. The recent Economist article on Qifang was right to reference the “shameless” copycat startegies of Chinese Dotcoms which have come to be known as “copy to China.”
Shameless it may be, but Qifang might also be brilliant. Education is stressed in Chinese society and the demand for education loans exists. As the Economist article explains, education loans have generally been provided by community groups, thus Qifang is simply taking something that already exists organically (real, on-the-ground P2P lending) and making it more transparent, efficient and scalable.
Additionally, Qifang may have replicated the model and design of Western P2P lenders but it has also learned from their mistakes. Taking into account unique aspects of Chinese culture, Qifang has built into its model tools that provide social collateral, reduce risk, and leverage the strong community ties found in Chinese societies. Social collateral comes in the form of required submission of certain family details which discourage borrowers from defaulting for fear of publically shaming their family. Similarly, by sending all loan payments straight to the school, Qifang decreases risk to lenders that may come about as a result of misused moneys. Last, Qifang encourages teachers, parents, and community lenders to become involved with loans as a way to increase both financial education and the social incentive to repay.
At about six months old, Qifang is too young for us to predict how well it will operate. However, looking at the profile of one young Chinese girl who has titled her loan as “I cannot witness my mother working hard for me every day, I have to rely on myself and be strong” and reading about the “honor” that she feels to be able to borrow from Qifang lenders, I can’t help but feel that powerful cultural forces beyond my understanding are at play. And this makes me wonder if P2P models are better suited for cultures where traditional (and sometimes seemingly constraining) social norms and bonds remain strong and undisputed?
Flicker credit: cleverCl@i®ê