Cultivating Growth: The 2nd Asia Pacific Region Alternative Finance Industry Report

103 Pages Posted: 30 Jun 2020

See all articles by Kieran Garvey

Kieran Garvey

University of Cambridge - Cambridge Centre for Alternative Finance

Hung-Yi Chen

Cambridge Centre for Alternative Finance, Judge Business School, University of Cambridge

Bryan Zheng Zhang

Cambridge Centre for Alternative Finance, Cambridge Judge Business School, University of Cambridge

Edward Buckingham

affiliation not provided to SSRN

Deborah Ralston

Independent

Yianni Katiforis

affiliation not provided to SSRN

Luke Deer

University of Sydney

Tania Ziegler

University of Cambridge - Cambridge Centre for Alternative Finance

Ying Kong

Tsinghua University

Rodney Maddock

Monash Business School; Victoria University - Victoria University of Technology

Ben Shenglin

Zhejiang University

Xinwei Zheng

Department of Finance

Pawee Jenweeranon

Independent

Wenwei Li

Zhejiang University

Hao Rui

University of Cambridge - Cambridge Centre for Alternative Finance

Eva Huang

University of Sydney Business School - Discipline of Business Law

Jingxuan Zhang

University of Cambridge - Finance

Date Written: September 6, 2017

Abstract

Cultivating Growth - 2nd Asia Pacific Alternative Finance Industry Report, was produced by the Cambridge Centre for Alternative Finance at the University of Cambridge, and the Australian Centre for Financial Studies at the University of Monash Business School in Australia, Tsinghua University in China and Zhejiang University in China. Financial support for the Asia Pacific Alternative Finance Research was generously provided by KPMG Australia, HNA Capital and the CME Group Foundation.

This 2017 Report builds on last year's Asia Pacific research, tracking emerging dynamics and developments within this fast changing industry at a macro-regional level, but also on a country-by-country basis. The findings contained within this report contribute to a wider research program conducted by the Cambridge Centre for Alternative Finance and its academic research partners to track the growth and development of alternative finance at a global level.

Market size and growth
In 2016, the alternative finance market continued to grow across the Asia Pacific in China, Oceania, East Asia, South East Asia, South and Central Asia to a total market volume of US$245.28 billion. This was an annual growth of 136 per cent compared to 2015 when US$103.31 billion was raised from across the region.

China maintains and strengthens its position as the global alternative finance market leader accounting for 99.2 per cent of the total Asia Pacific alternative finance market and an estimated 85 per cent of the total global market in 2016 with US$243.28 billion raised in mainland China alone.

Across much of the wider Asia Pacific region, the alternative finance market continues to grow with a total of US$2.004 billion in 2016, up by 79 per cent compared to 2015 with US$1.12 billion.

Outside of China, Australia was the second largest alternative finance market with US$609.6 million in 2016, followed by Japan in third with US$398.45 million and in fourth South Korea with US$376.31 million, New Zealand in fifth with US$223.25 million, Singapore in sixth with US$163.75 million and India in seventh with US$124.16 million.

Leading online alternative finance models
In China, the largest alternative finance model was marketplace/peer-to-peer consumer lending with US$136.54 billion, equating to approximately 56 per cent of the total market in China. In second, was marketplace/peer-to-peer business lending with a total of US$58.18 billion which was around a quarter of the market in China. Balance sheet business lending totalled US$27.48 billion while balance sheet consumer lending amassed US$9.38 billion.

In the wider Asia Pacific market, outside of China, again marketplace/peer-to-peer consumer lending was the largest alternative finance model with US$484.86 million (24 per cent of the Asia Pacific market outside of China), while balance sheet business lending accounted for around 23 per cent of the total market with US$466.08 million in 2016.

Alternative business finance
In China, alternative finance for businesses continued to grow in 2016, with businesses raising $US93.53 billion in funding - a 107 per cent increase on the US$45.11 billion in 2015.

China is currently dominated by non-business alternative finance which totalled US$146.8 billion in 2016 led by peer-to-peer consumer lending. However, it is likely that a sizable proportion of consumers in China are using personal loans for business purposes.

In the Asia Pacific, outside of China, a total of US$1.46 billion was raised by businesses which was a 72 per cent increase on the US$0.85 billion raised in 2015 with an estimated 42,592 business entities utilising alternative channels of business finance in 2016.

Institutional investment
In China, as in 2015, the alternative finance market had distinctively low levels of institutional participation compared to other markets such as the USA and the UK. Peer- to-peer business lending platforms reported only five per cent of their funding coming from institutions in 2016, while peer-to-peer consumer lending had six per cent and peer-to-peer real estate lending, 15 per cent. These online lending models are currently driven by individual, retail lenders in China.

In the wider Asia Pacific region, marketplace/peer-to-peer consumer lending had the highest level of institutional funding at 55 per cent of total funds while invoice trading had 46 per cent and balance sheet business lending had 44 per cent. Equity- based crowdfunding had much less at 15 per cent, while marketplace/ peer-to-peer business lending had seven per cent.

Business model & product innovation
In China, less than one third of surveyed platforms across all types of alternative finance significantly altered their business model in 2016, while 46 per cent reported a slight alteration of their business model. Around a quarter of platforms did not make any changes to their business model in 2016.
In terms of product innovation in China, 29 per cent of platforms surveyed across all types of alternative finance stated they had significantly altered their product in 2016 while just over half had made some slight changes in this year. Only 18 per cent of platforms in China had made no change to their products in 2016.

Industry perceptions of risk & regulation
In China, more than 50 per cent of surveyed platforms across all online lending models perceived both existing and proposed regulatory norms to be adequate and appropriate in 2016.

In China, 73 per cent peer-to-peer consumer lending platforms perceived cyber-attacks to be the biggest threat to the industry while 76 per cent of peer-to-peer business lending platforms perceived fraud to be the most serious industry risk. 99 per cent of balance sheet consumer & business lending platforms see changes to local regulation in China as the biggest risk.

In the wider Asia Pacific outside of China, 69 per cent of platforms in Japan see existing regulation as inadequate or too relaxed while in Thailand, 80 per cent of surveyed platforms see no specific existing alternative finance regulation and that it is not needed. Conversely, in India, around a third of platforms see existing industry regulations as adequate while around half see no existing regulations currently. In Singapore, Australia and Malaysia around two thirds of platforms and three quarters of platforms in New Zealand, see existing regulations as adequate and appropriate.

Keywords: FinTech, Alternative Finance, Regulation, Policy, Asia Pacific, P2P Lending, Crowdfunding

JEL Classification: G23, G28, G38, F65, F63, G18, O19, O33, O38, O55, Q01, Q28, Q42

Suggested Citation

Garvey, Kieran and Chen, Hung-Yi and Zhang, Bryan Zheng and Buckingham, Edward and Ralston, Deborah and Katiforis, Yianni and Deer, Luke and Ziegler, Tania and Kong, Ying and Maddock, Rodney and Shenglin, Ben and Zheng, Xinwei and Jenweeranon, Pawee and Li, Wenwei and Rui, Hao and Huang, Eva and Zhang, Jingxuan, Cultivating Growth: The 2nd Asia Pacific Region Alternative Finance Industry Report (September 6, 2017). Available at SSRN: https://ssrn.com/abstract=3621288 or http://dx.doi.org/10.2139/ssrn.3621288

Kieran Garvey (Contact Author)

University of Cambridge - Cambridge Centre for Alternative Finance ( email )

10 Trumpington Street
Cambridge, CB21QA
United Kingdom

Hung-Yi Chen

Cambridge Centre for Alternative Finance, Judge Business School, University of Cambridge ( email )

Cambridge Centre for Alternative Finance
10 Trumpington Street
Cambridge, Cambridge CB2 1QA
United Kingdom

Bryan Zheng Zhang

Cambridge Centre for Alternative Finance, Cambridge Judge Business School, University of Cambridge ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.jbs.cam.ac.uk/ccaf

Edward Buckingham

affiliation not provided to SSRN

Deborah Ralston

Independent

Yianni Katiforis

affiliation not provided to SSRN

Luke Deer

University of Sydney ( email )

Level 3, Social Sciences Building
Sydney, NSW 2006
Australia

Tania Ziegler

University of Cambridge - Cambridge Centre for Alternative Finance ( email )

10 Trumpington Street
Cambridge, CB21QA
United Kingdom

Ying Kong

Tsinghua University ( email )

Beijing, 100084
China

Rodney Maddock

Monash Business School ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Victoria University - Victoria University of Technology ( email )

P.O. Box 14428
Melbourne City, Victoria 8001
Australia

Ben Shenglin

Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

Xinwei Zheng

Department of Finance ( email )

221 Burwood Highway
Burwood, Victoria 3125
Australia

Pawee Jenweeranon

Independent ( email )

Wenwei Li

Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

Hao Rui

University of Cambridge - Cambridge Centre for Alternative Finance ( email )

10 Trumpington Street
Cambridge, CB21QA
United Kingdom

Eva Huang

University of Sydney Business School - Discipline of Business Law ( email )

University of Sydney
Sydney, NSW 2006
Australia

Jingxuan Zhang

University of Cambridge - Finance ( email )

United States

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