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Qifang.cn Aims to Fund China's Loanless Students
 Education is a big industry in the middle country, but how many people can actually afford it? JLM recently caught up with Calvin Chin, CEO of peer-to-peer student loan platform Qifang.cn, to find out more about his up-and-coming social lending organization and why they are focusing on student loans in China.
JLM: How did your idea for Qifang.cn evolve?
Chin: Essentially we were inspired by Grameen Bank, which is a microfinance organization in Bangladesh, as well as California-based Kiva.org and Prosper.com. Social venture or social enterprise, doing something good while creating a strong, profitable, self-sustaining business, is part of our philosophy. In China, there is a need for something like Prosper to reach out to a large, growing consumer base of Internet users in a way that would overcome some of the challenges of e-commerce.
In contrast with other social lending services, we are focused solely on education in China. Here people spend more on education than on anything other than food. Over the past several decades, there has been a move in China to privatize more of the costs of education. In the past, education was almost free. Now, individual students have an increasing burden and tuition rates are rising faster than inflation.
An average family in a second-tier province or city has to pay between RMB 8,000 and RMB 15,000 or even more if they have a student who wants to go to university in a first-tier city. With national per capita GDP at something like 17,000 RMB, that is a tremendous burden. Today, only about 10% of students are borrowing from formal programs like credit cooperatives, government programs and commercial banks. In countries like the U.K., Canada and the U.S. where there is more of a structure for and consciousness of education finance, 40-45% of students receive financing. In China, maybe 15-20% of students stay in school after high school, be it technical school or college. Some students start giving up on the idea of university during middle school because they know they can only afford to move straight into the work force.
JLM: Can you tell us more specifically about your website?
Chin: We started talking about Qifang.cn in the summer of 2007, and we spent about a year developing the business model and the product. At the end of fall last year, we started with some pilot programs. We still consider ourselves to be in beta, however, we are accepting new students and lenders. We are continuing to roll out a lot of new functions for our lender community, investor institution partners as well as our borrowers. We recently redesigned the site and will roll out a new English version -- which allows students, including expatriates, to communicate their requests to overseas and non-Chinese speaking lenders -- this week.
We really focus on Chinese students and two of their needs: to obtain funding and develop their careers. A lot of companies prefer to hire people who have had experience either working for one or two years or studying abroad. If a company can get involved with a student earlier and can fund the kind of students that they find attractive, students can make contacts and cater their skills more to the market. Tying loans to jobs can also help with the repayment rate.
JLM: How many educational and corporate partners do you have?
Chin: In our beta, we have already engaged more than 10 partners.
JLM: What are Qifang's revenue streams?
Chin: Qifang's revenue streams are from transaction fees at the origination and/or repayment of the loan, advertising and lead generation such as co-selling products and services to our partners. We are currently not charging fees for any of our primary services, but we are building tremendous value in our credit history data and in our customer relationships which include borrowers' first-credit use and lenders who have investment capital. We have different monetization strategies for both of these values but are not disclosing them at this time.
JLM: How do you deal with issues like Internet fraud?
Chin: We primarily work directly with schools to verify borrower information including student enrollment, ID number and tuition needs. We are an open platform so even if you aren't verified you can still be on the platform, but you might not get the loan you want. Over time, as we build our credibility, we anticipate that the platform will become more open.
Even after users are verified, Qifang.cn directs funding to schools rather than individuals. We also forbid lenders from participating in the bidding process until they fund their accounts.
JLM: Could you give us some examples of success stories?
Chin: One borrower I think is really interesting is Pie Zilong. Pie is a second-year student at Ningxi Teacher's College's School of Applied Mathematics. He used Qifang.cn to get a RMB 3,000 loan at an interest rate of 5% and loan period of 15 months. His family was paying about RMB 40,000 per year in school fees for him, his twin brother and an older sister, who was attending grad school.
Another successful partnership was a pilot where international outsourcing company Symbio used Qifang.cn to administer J2EE training programs to interns at Jincheng College of Sichuan University.
JLM: Are there any regulatory risks associated with your business model?
Chin: Recent announcements and speeches from Premier Wen Jiaobao and bank officials are very supportive of non-bank lending to grow small and medium-sized business borrowing and boost consumption, education and consumer demand outside of first-tier and coastal cities. We have talked to provincial and municipal level governments, the Ministry of Education and the central bank about data and rules around banking and licensing as well as those dealing with education. Qifang's goal is not to compete or to challenge the banking system. We think there is a role for us to play in conjunction with existing programs and services and we're very comfortable with the regulations and policy guidance that are already in place.
JLM: How many employees are working for Qifang, and what are your short-term business expansion strategies?
Chin: We have 15 employees across two offices in Shanghai and Chengdu, and we are planning for expansion elsewhere in China as well as internationally. We will remain focused on Chinese students for the next one or two years, but we are already expanding beyond universities to job training and certificate programs, internships and study abroad programs. We may also do more with Chinese students studying overseas and with foreign students studying in China, and eventually maybe even other markets with the right partners.
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