China Allows Jack Ma’s Ant to Start Consumer Finance Unit

China is allowing Jack Ma’s Ant Group Co. to start operations at its consumer finance company, the first signs of progress after regulatory crackdowns that torpedoed the fintech giant’s record listing.

China Allows to Start Consumer Finance Unit

The unit, registered in Chongqing, will be allowed to lend to individuals, issue bonds and borrow from domestic financial institutions, according to a notice from the China Banking and Insurance Regulatory Commission on Thursday.

The new entity is essential for Ant’s most lucrative business. Regulators have demanded that the fintech group transfer its online lending operations and outstanding loans to the unit, which will be under more scrutiny. It’s an important step in the process of Ant’s overhaul as it transitions to become a financial holding company that will be regulated more like a bank.

Chongqing Ant Consumer Finance Co. will have registered capital of 8 billion yuan ($1.3 billion). Ant will hold a 50% stake. Other investors include Nanyang Commercial Bank Ltd., China TransInfo Technology Corp. and Contemporary Amperex Technology Co.

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The banking regulator said that Ant will need to comply with laws by fully disclosing borrowers, loan terms, annual interest rates and overdue loans. In the past, consumer finance companies have been typically allowed to lend out 10 times their capital. Ant, China’s largest provider of online consumer loans, issued about 1.7 trillion yuan in micro consumer loans to 500 million people as of last June.

Consumer finance is getting increasingly competitive in China. More than 20 such companies have emerged after the banking regulator started a pilot program in 2010 to promote purchases of durable goods such as home appliances. Such firms, while unable to take deposits, can fund their loans by borrowing from the interbank market, shareholders and issuing bonds and asset-backed securities.

China Allows Jack Ma’s Ant to Start Consumer Finance Unit via @MasterMindUpdate
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