Weidai, Weighed by Regulations, Seeks Online Microcredit License
China's regulators have encouraged lending platforms to transform into microcredit companies, as tightened regulations have caused thousands of Chinese P2P firms to exit within the past few years.
Weidai Ltd. (NYSE: WEI) announced on Thursday that it is trying to apply for an online microcredit license in China to navigate around the country's strict regulations in the peer-to-peer lending industry.
The Hangzhou-based financing solutions provider said in a statement today that state regulators have encouraged lending platforms to transform into microcredit companies and that Weidai aims to use that chance.
"Weidai has been implementing various initiatives to meet the government's compliance and transformation requirements," Hong Yao, the founder, chairman and chief executive officer of Weidai, said in the statement.
He added, "We will closely monitor the market fluctuations and continue to execute our strategies to diversify our business to meet evolving market demand."
The news follows a notice issued by China's Internet Financial Risk Special Rectification Work Leadership Team Office that demanded Chinese P2P firms transform into small loan providers within two years, as Reuters reported last month. The office was launched by Beijing to mitigate risks in the online lending sector, according to the report.
After uncovered fraud and Ponzi schemes in China's financing sector, regulators have tightened rules on the industry. Thousands of firms have exited the market since then. As of October, just 427 P2P companies were operating in China compared with 6,000 in 2015, the South Morning China Post reported last month.
Founded in 2011, Weidai connects small and micro enterprise owners with online investors and institutional funding partners. In terms of loan volume, the company claims it's the largest auto-backed financing solution provider in China.
Weidai reported in September that in the three months through June its revenue was $132.1 million, down 4% year-over-year. Net income in the quarter slipped to $15.6 million compared with 26.6 million, a year ago, Weidai said.
Shares in Weidai closed 11 cents lower on Thursday, at $3.09 per American depositary share.