China dominates Asia's fast-growing peer-to-peer (P2P) lending market, but a rising number of firms are looking to tap investors in other emerging countries in the region – among them Hong Kong-based startup Oriente Finance. 

Oriente this month hired investment industry veteran Lai Voon-San to help raise funds, and plans to launch online lending products this year in its target markets of Indonesia and the Philippines.

Individuals and small businesses in such countries often struggle to obtain credit from traditional channels such as banks, while investors are increasingly keen to provide loans on which they can achieve a decent rate of return. P2P platforms match up the two sides.

Lai joined Oriente as head of asset management, according to his LinkedIn page. He was formerly deputy chief executive and head of robo-advisory at Hong Kong fund house Value Partners.

Lai Voon-San: new role

He will “work with partners, banks and other financial institutions to increase the firm’s overall balance sheet” and promote and represent the company to the investment community, says his LinkedIn posting.

Lai left Value Partners in October last year after some five years with the firm. He had led the group’s newly set up fintech business for eight months. 

A spokesman for Oriente declined to comment for this article, apart from to say that the company is still in the process of putting together the core team and is developing various products for rollout. Established companies such as CreditEase and Lufax have since moved beyond their P2P roots into full-blown wealth management.

RISING ACTIVITY

Founded in April 2016, Oriente has been working to set up partnerships with local companies in its target markets, sources told AsianInvestor.

It inked a fintech joint venture in August last year with Express Holdings, a unit of Philippine conglomerate JG Summit. The JV, Oriente-Express, says on its website that it is developing a digital finance marketplace to address financial exclusion for underbanked consumers and micro, small and medium-sized enterprises (MSMEs).

Such activity is clearly on the rise. P2P lending is expanding rapidly in Asia – most notably in China – as it is globally, suggesting huge business potential.

Chinese P2P consumer lending has swiftly grown to $137 billion in 2016 from $3.85 billion in 2013, while P2P business lending expanded to $58 billion from $1.44 billion over the same period, according to a November report on alternative finance from the University of Cambridge's Judge Business School. 

Over the same period, P2P consumer lending volume in Asia Pacific excluding China rocketed to $485 million from just $6 million, and business lending to $334 million from $82 million.

Such growth rates look set to continue. Global P2P lending market is projected to expand at a compound annual growth of 51.5% to reach $460.3 billion by 2022, having stood at $26.1 billion in 2015, according to Allied Market Research.

INSTITUTIONAL INTEREST?

Online lending models are currently driven by individual, retail lenders in China – so will institutional investor participation in P2P lending grow?

P2P business lending platforms in China reported only 5% of their funding coming from institutions in 2016, while P2P consumer lending had 6% and P2P real estate lending 15%. 

In Asia Pacific as a whole (excluding China), P2P consumer lending had the highest level of institutional funding at 55% of total funds, while P2P business lending had 7%.

But it may be that P2P lending will remain a market for individual lenders and borrowers. Institutional investors’ allocations are huge, while the investors on P2P platforms tend to be smaller investors.

An institutional investment will be broken into many smaller loans with different durations and default risks, said Zennon Kapron, founder of Kapronasia, a Shanghai-based fintech research firm.

Meanwhile, Kapron told AsianInvestor, P2P lenders are likely to see stronger business growth in Southeast Asia than China, because there is less competition in the former market.

But Oriente is not the only firm eyeing the region. Jakarta-based Investree is another P2P startup in the process of raising money to develop its business in Indonesia, also with a view to expanding beyond its home market.

However, Kapron stressed that Southeast Asia still poses many of the same challenges as other developing markets in the region, including China. For instance, each country will have its own regulations on fintech, which means firms must take a specific approach to each country, he noted.

For instance, Beijing put the brakes on the micro-lending boom in November last year, with the central bank banning provincial governments from approving the creation of new internet micro-lending firms.

Meanwhile, P2P was one of the first fintech verticals to be regulated in Singapore in 2016. And, shortly after the implementation of the regulations for P2P in Singapore, regulations for debt-based crowdfunding licences to operate in Malaysia and Indonesia were established, wrote Eddie Lee, vice president of the Singapore Fintech Association, in an article in January.