Report: Ant Seeks To Shore Up Consumer Finance Unit’s Funding

As it gets ready to fold in its micro-lending operations, Ant Group is in discussions with other backers in its new consumer finance unit to strengthen the company’s funding, Reuters reported, citing unnamed sources.

To satisfy regulatory mandates, it would require 30 billion yuan (approximately $4.6 billion), according to one of the unnamed sources in the report. Ant reportedly intends to fold most of its micro-lending operations into the unit. That migration would let it keep operations through the country and grow with less difficulty, according to two unnamed sources.

Micro-lending is very popular in China, and Ant Group has two fruitful micro-lending operations. One micro-lending business is short-term personal loan provider Jiebei and the other is virtual credit card-like Huabei. These operations are headquartered in Chongqing and comprise most of its credit business.

Jiebei and Huabei would need to restrict their business to Chongqing if they don’t receive countrywide licenses under new draft regulations the nation’s central bank released in November. In the event the micro-lending operations were part of the consumer finance unit, that would not present an issue, according to the report.

Furthermore, consumer finance firms can lend as much as 1000 percent of their registered capital, but digital micro-lending companies are just permitted leverage ratios of two to three times.

The news comes after it was reported that Jack Ma will restructure Ant Group into a financial holding company.

China’s central bank, the People’s Bank of China, will oversee the new entity, which will be subjected to stringent asset requirements, according to unnamed sources in a previous published report.

Ant had created a working group led by CEO Simon Hu to work with regulators. The company’s Alibaba mobile program has over 1 billion users in China and has handled approximately $17 trillion in online payments in the 12 months leading up to June of last year.

Alipay, which also sells investment and insurance offerings, has also provided short-term, unsecured loans to approximately half a billion individuals.