Chinese SME Lenders Turn To Social Media

Last Friday (Aug. 14), Chinese Internet conglomerate Tencent revealed that it would be launching a credit rating service and using social media sites to make its credit assessments more robust. According to reports from Bloomberg, the tactic signals a growing trend in the nation among lenders who are choosing to examine social media profiles to determine the creditworthiness of a small business borrower.

Tencent Credit Bureau, reports said, is aligned with China’s efforts to increase SMEs’ access to working capital in the nation. But with low credit card penetration, coupled with unsuccessful efforts to heighten bank lending, small businesses are turning towards alternative lenders, and alt-lenders, reports said, are looking to new ways to mitigate risk.

According to Bloomberg, China’s recent launch of a new credit reporting agency has also been unsuccessful in making it easier for lenders to finance small business borrowers. That’s because the banks are reluctant to share their consumer data, reports said, and the information that is shared is often insufficient.

Earlier this year, several companies were given clearance to launch their own credit rating businesses, including Tencent. Without access to borrowers’ data, the companies are reportedly turning to social media sites and other ways to measure creditworthiness.

Tencent has access to troves of data from its social media connections, plus information from its WeBank operations. Online commerce giant Alibaba similarly plans to launch credit assessment services through its Sesame Credit Management, which will use information aggregated from its payment unit Alipay.

But the use of social media in assessing creditworthiness is likely to grow, reports said. Tencent has reportedly voiced its support for the tactic, saying that it believes “birds of a feather flock together” and that social media information will “help financial institutions know their potential debtors better.”

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