According to 36kr, JIN Xiaolong (金晓龙), vice president at MYbank declared that he wishes their microfinance services could cover all the sole traders and street vendors in China in three years’ time.

MYbank is an online bank launched by Alibaba and its affiliate firm Ant Financial in 2015. Compared to tradition banks, it has 3 main differences which are presence, focused customer, and loan approval mechanism. Firstly, it runs completely on the cloud with no physical branch. Secondly, its focused customers are those micro-small-to-medium businesses compared the rich which are valued by many traditional banks. Thirdly, rather than involving manual processes advanced AI and big data technology have been incorporated into the loan approval process, which speeds up the whole approval process and lowers the default rate.

JIN claims that in 2018 they have provided more than CNY 1 trillion (USD 149 trillion) finance to micro and small businesses, while 96% of which has been sent to micro and small businesses whose financing amount is less than CNY 1 million (USD 149 thousand).

In the following part, the importance of providing financing micro and small businesses and why traditional banks are absent will be touched.

The importance of financing micro and small businesses

Micro and small businesses are critically important to the national economy.as it is the main channel of employment.

According to iResearch, micro and small businesses, which accounted for more than 60% of the country’s GDP, while 37.8% of them were granted loans in 2017. While compared to Japan, a developed economy, micro and small businesses constituted 50% of its GDP and 62% of them have access to loans.

The absence of traditional banks

There are several reasons:

Firstly, it has been widely considered that traditional banks have been slow with technological innovations. By leveraging their existing technology, it could be difficult and costly to access micro businesses’ operation or default risks.

Secondly, traditional banks tend to prefer mature and large business customers. The reasons are obvious – higher possible revenue/profit and less default risk.