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No score, no problem. The lenders opening up access to SME credit in China

No score, no problem. The lenders opening up access to SME credit in China

Many of us in the West like to romanticise about our respective ‘underserved and overcharged’ SME markets as being ripe for fintech disruption. The reality is, when compared to their small business peers in China, they have a well-stocked buffet of banking options at their disposal.

Consider for a moment the following. Only 300 million entries exist in China’s centralised credit scoring database. That’s a mere 22 percent of the country’s 1.38 billion inhabitants who can potentially access credit. Now take the US, where some sources have the percentage of the population with some credit history at 86 percent. The difference tells us a lot about the propensity of the market for disruption.

In a market like the US, the motivation remains low for incumbents to innovate for the masses, who for the most part can be adequately assessed. This drives alternative credit scoring to the fringes of the financial system, to smaller fintech’s servicing niche parts of the market. Disruption therefore remains low.