Property 101: Asia-Pacific alternative finance market grew 323 percent in 2015

Property 101: Asia-Pacific alternative finance market grew 323 percent in 2015
Property 101: Asia-Pacific alternative finance market grew 323 percent in 2015

GUEST OBSERVER

The Asia-Pacific alternative finance market grew 323 percent to $102.8 billion in 2015, led by four-fold growth to more than $100 billion in China, finds first regional benchmarking report

Survey was conducted by a research team from the Cambridge Centre for Alternative Finance, the Tsinghua University Graduate School at Shenzhen and the University of Sydney Business School, in collaboration with KPMG and with the support of ACCA (the Association of Chartered Certified Accountants) and CME Group Foundation.

The Asia-Pacific online alternative finance market including peer-to-peer lending and crowdfunding grew 323 per cent in 2015 to $102.8 billion, led by a four-fold increase in China to $101.7 billion, according to the first comprehensive study of the Asia-Pacific online alternative finance market.

“The Asia-Pacific online alternative finance market is fluid, diverse, increasingly complex and growing at a rapid pace,” said the report issued today, entitled Harnessing Potential – The 2015 Asia-Pacific Alternative Finance Benchmarking Report.

Outside of China, the rest of the Asia-Pacific region recorded alternative finance volume of $1.12 billion in 2015, up 313% from the $271.9 million raised in 2014. The largest markets in 2015 beyond China were Japan ($360 million), Australia ($348 million), New Zealand ($268 million), South Korea ($41 million) and India and Singapore (each about $40 million).

China is the world’s largest alternative finance market based on the researchers’ global dataset, the report said. While there have been reports on China’s alternative finance market by Chinese companies, this is the first study to benchmark the Chinese market with a set of comparable international standards.

“The Chinese online alternative finance market grew from a relatively low base of $5.56 billion in 2013 to reach $24.30 billion in 2014 and then went on to reach $101.7 billion in 2015,” the report said. Peer-to-peer consumer lending ($52 billion) and peer-to-peer business lending ($40 billion) are by far the largest market segments in China. Reasons cited in the report for the rapid growth of alternative finance in China include the country’s global leadership in Internet user base and smartphone connections, and the fact that alternative finance has “been mostly unrestricted and unchecked” until recent guidelines by regulators.

The alternative finance market includes peer-to-peer consumer and business lending, equity-based and reward-based crowdfunding, and other provision of finance to individuals and businesses through alternative channels via online marketplaces outside of the banking system.

Other key findings of the report included:

  • More than half surveyed platforms in China (with the exception of equity-based crowdfunding) deemed existing regulation to be inadequate or too relaxed, or recognized the need for specific regulation to be introduced. 
  • In per-capita terms, the largest alternative finance markets in Asia-Pacific in 2015 were China ($74.54), New Zealand ($59.37) and Australia ($14.83). 
  • The institutional funding of online alternative finance is notably higher in the wider Asia-Pacific region outside of China, at 63 percent for peer-to-peer consumer lending outside China and 10 per cent in China. 
  • The institutional ownership of alternative finance platforms is far higher for China, at 23 per cent majority interest for banks or other institutional owners compared to 6 per cent in the Asia-Pacific region outside of China. 
  • Outside of China, peer-to-peer business lending has been the largest alternative finance funding segment for three consecutive years, but peer-to-peer consumer lending is the fastest-growing sector with average year-on-year growth rate of 653% between 2013-2015.
  • The Asia-Pacific region appears to have relatively high rates of female participation in online alternative finance markets, at 33 per cent for peer-to-peer consumer borrowers outside China and 19 per cent in China. 

The survey involving 20 research partners was based on data from 503 leading alternative finance platforms in 17 Asia-Pacific countries and regions, of which, 376 were from mainland China. The study captured an estimated 70 per cent of the visible market, yielding the estimates contained in the report.

The report described the regulatory environment for alternative finance across the Asia-Pacific region as “diverse and rapidly changing.” While some countries such as Singapore have chosen to regulate alternative finance within pre-existing frameworks, others including New Zealand have created bespoke regulation. And while surveyed platforms in New Zealand and Malaysia generally felt existing regulation is “adequate and appropriate,” platforms in Japan and South Korea were more concerned that regulation is too strict and Chinese platforms generally felt regulation was too lax.

“The opportunities for the world's most populous region to harness the potential of alternative finance for innovation, economic growth, market efficiency, and creativity are abundant,” the report said. “The present challenge is how to best nurture the alternative finance industry, grow the market in a sustainable manner and develop an appropriate and proportionate regulatory regime that strikes the right balance between encouraging financial innovation and protecting the interests of consumers and investors.”

The survey was conducted by an international research team from the Cambridge Centre for Alternative Finance at Cambridge Judge Business School, the Tsinghua University Graduate School at Shenzhen and the University of Sydney Business School, in partnership with KPMG and with the support of ACCA (the Association of Chartered Certified Accountants) and CME Group Foundation.

This article was written by the University of Cambridge Judge Business School. 

To download a full copy of the report, click here.

Tags: 
Finance China

Community Discussion

Be the first one to comment on this article
What would you like to say about this project?