Amazon to expand its lending program for SMEs in China

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02:20

Amazon is inching further into the Chinese market, which is also the world’s largest e-commerce market. The company's small business loan project, called Amazon Lending, grants loans to sellers on the Amazon marketplace.

Small business owners often find it difficult to get business loans from traditional financial institutions, due to the lack of guarantees or collateral. Analysts said many e-commerce companies have long been providing loans as a way of attracting small sellers to their platforms.

“First they have big data, business data on the platform, which allows them to fully understand SMEs' business transactions and business trends in the future. It's reported that if they can provide financial services to SMEs then they probably could easily increase their profits by over 30 percent,” said Calvin Zeng, audit partner of Deloitte China.

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Zeng commented that the demand for loans from SMEs is huge in China. Data showed that as of the first quarter of 2018, the outstanding loans to SMEs from traditional financial institutions were around 25 trillion yuan.

While Amazon said that it has granted three billion US dollars’ worth of small-business loans to merchants in countries including the United States, Japan and the UK last year. Whether such a lending project would work for Amazon in China remains to be seen, as one analyst said the crucial condition is that the e-commerce platform needs to have enough transactions to support the business.

“For e-commerce platforms, you need to have enough customers to bring in more customers. With more customers, you create more demand, thus room for more sellers. So Amazon's move to give loans will be a good thing for the sellers. But we should keep in mind that the issuances of these loans are based on transaction records,” said Professor Cui Lili, executive director at institution of e-commerce in SUFE.

However, there will be a tough fight in China, Amazon even as a global retailer estimated by iResearch showed the company has less than two percent of China's market share, and that's after more than 10 years of operation in the country.