An ad for Alibaba's financial services. (Internet photo)
Since the launch of its unsecured loan operations in April 2010, the Alibaba Group, a leading e-commerce firm in China, has provided 70 billion yuan (US$11 billion) of loans to 227,000 businesses which likely didn not qualify for traditional bank loans.
Alibaba is also facing the problems of replenishing its capital and restrictions on cross-regional operations. Hu Xiaoming, president of the group's financial business group, said they will begin making micro-loans available to financial institutions starting in June.
Zeng Ming, chief strategy officer at Alibaba, reportedly downplayed the role of the loans, saying that the internet giant is "essentially an information company, for which information is the core productivity. Our real task is to manipulate information and maximize the value of information," according to the Beijing-based Economic Observer.
Backed by information provided by the group's e-commerce platforms however, Alibaba's small-loans operation has been a major innovator by sidestepping bank regulators while running a profitable platform for micro-loan operations.
The group's financial wing has rolled out various micro-loan products, including Alibaba unsecured loans, Taobao unsecured and order-based loans, which are available to customers of Taobao, Tmall and Alibaba itself.
The innovative micro-finance operation was initiated in April 2010, when an affiliated small-loan company was set up in Zhejiang province. The firm was joined by another set up in Chongqing in 2011, and the two firms have become the main drivers in Alibaba's small-loan operations, according to the report.
Group chairman Jack Ma announced preparations in early March for the setup ofan Alibaba micro-finance service group, which is in charge of all the services for small enterprises and individuals. This will be the group's first year offering unsecured loans.
"The new micro-loan technology, developed by an innovative team in our financial group, is critical for providing loans to micro enterprises. Information and the internet is the core of the micro-loan technology," said Hu Xiaoming. Alibaba offers small short-term loans to enterprises, which normally cannot obtain loans via traditional financial channels.
Alibaba's small-loan operation integrates the background information collected from its e-commerce wing, thereby solving the problem traditional lenders have where there is insufficient information about a customer's financial assets, according to investment firm Great Wall Securities.