Home Credit to Be China’s First Foreign Direct Lender

Home Credit Group, controlled by the Czech Republic’s largest closely held financial services provider, said it will become the first foreign company to directly lend to Chinese consumers.

The finance company next month will offer its services through a subsidiary in the northern city of Tianjin, Chief Executive Officer Alexander Labak said in an interview in Beijing. Home Credit has been operating under a “special guarantee-trust model” in southern China’s Guangdong province and southwestern Sichuan province for three years, he said.

Home Credit, owned by Amsterdam-based PPF Group NV, was among four companies chosen this year by China’s banking regulator for a test program to bolster lending to low-income customers. The companies will be allowed to provide credit for the purchase of consumer goods such as televisions and mobile phones to people who don’t have access to bank loans and credit cards in one city each.

“Making a large number of smaller loans to consumers is a specialized area, unlike conventional banking,” said Labak. “We run consumer lending like one runs a factory.”

The China Banking Regulatory Commission bars consumer finance companies from charging interest rates higher than four times the benchmark lending rate, which currently stands at 5.56 percent for a one-year loan.

Photographer: Nelson Ching/Bloomberg

Alexander Labak, chief executive officer of Home Credit, poses for a portrait in Beijing. Close

Alexander Labak, chief executive officer of Home Credit, poses for a portrait in Beijing.

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Photographer: Nelson Ching/Bloomberg

Alexander Labak, chief executive officer of Home Credit, poses for a portrait in Beijing.

The average Chinese consumer in its existing lending program, which operates in partnership with local banks, has an income of 2,500 yuan ($375) a month, Labak said. The average size of the 700,000 loans extended this year by Home Credit through that program at outlets in 6,500 Chinese stores is 1,800 yuan each, he said.

Bank of China Ltd., Bank of Beijing Co. and Bank of Chengdu also won approval to set up consumer finance companies for the pilot program, the China Banking Regulatory Commission said in January. The three banks will each operate in Beijing, Shanghai and Chengdu.

--Eva Woo. Editors: Chitra Somayaji, James Gunsalus

To contact the reporter on this story: Eva Woo in Beijing at ewoo9@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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