Chart of the Day: Licensed Microlenders Shrink to Record Low

China’s licensed microlenders have shrunk in number to an almost six-year low, even as the amount they lent out rebounded slightly.

Licensed microloan companies are a key player in China’s lucrative and still-growing lending market. Others include licensed banks, consumer finance firms, registered peer-to-peer companies and unqualified lenders.

At the end of September, the number of licensed microloan firms dropped to 7,680, marking the lowest level since the end of 2013, according to the People’s Bank of China’s latest quarterly report (link in Chinese) on the sector.

Their number has declined each quarter since the end of September 2015, when it hit a high-water mark of 8,965.

The decline in recent years has been partly due to China’s economic slowdown, Bai Xuemei, a deputy head of the China Micro-credit Companies Association, an industry group for microloan firms, said at a forum last October.

In 2005, China launched a pilot program allowing licensed microloan firms to be set up in several provincial-level regions. The program was rolled out nationwide three years later, boosting the number of such firms to 1,334 by the end of 2009 from less than 500 a year earlier, according to data from the central bank.

It is quite normal for some microloan companies to close down amid fierce competition in the crowded industry, Bai told Caixin on Tuesday.

At the end of the third quarter of 2019, the value of outstanding loans issued by licensed microlenders rebounded slightly to 928.8 billion yuan ($131.6 billion), after decreasing for four consecutive quarters, the central bank report showed.

This story has been updated to include additional comments.

Contact editor Flynn Murphy (flynnmurphy@caixin.com)