Recently, not long after entering 2025, 20 local small loan companies in China have closed their doors. Some analysts believe that the decline in the Chinese economy and reduced demand are important reasons for the exit of small loan companies from the market.
According to a report by “First Financial” on January 14th, local financial organizations such as small loan companies in China have been shutting down one after another this year.
On January 9th, the local Financial Management Bureau of the Guangxi Zhuang Autonomous Region in China announced on its official website that out of 128 small loan companies participating in the annual review in Guangxi, 25 were required to rectify within a deadline and two were deemed unqualified, indicating that at least two small loan companies have exited.
On January 3rd, Changfachengxin Small Loan Company Limited in Jiang’an District, Wuhan City, Hubei Province, exited the small loan industry by changing its name and scope of business, thereby terminating its qualification for small loan operation.
The local Financial Management Bureau of Hunan Province recently listed a batch of disconnected and “shell” local financial organizations, including 16 small loan companies. After completing changes related to the signage and names of their business premises, these 16 companies are required to remove terms like “small loan,” “financial guarantee,” “financial leasing,” “commercial factoring,” or “pawnshop” from their company names and exclude related businesses from their operations.
On January 10th, four small loan companies in Hunan Province, including Longhua Small Loan Company in Chaling County and Huifeng Small Loan Co., Ltd. in Liuye Lake, Changde City, had their business qualifications for issuing small loans revoked.
According to incomplete statistics, since the beginning of 2025, more than 20 local loan companies in Hunan, Inner Mongolia, Fujian, Chongqing, Hubei, and other regions have been cleaned up or deregistered.
Additionally, some central enterprises and leading Internet companies are continuing to integrate or sell off their small loan licenses. Tianyi Electronics has put up for sale all the equity of its small loan, guarantee and insurance companies. Ant Group has transferred its microloan and borrow business to Ant Consumer Finance for operation, and two of its small loan companies – Ant Xiaowei Xiaodai and Ant Shangcheng Xiaodai – have exited.
Regarding the reasons for the exit of small loan companies, an insider from the small loan industry analyzed to “First Financial” that some small loan companies in the market currently have issues such as extensive operation and management, high credit risks, and licensing problems for leasing out licenses. The exit of some “shell” or “disconnected” companies or companies with abnormal operations helps reduce the risks in the industry; moreover, the exit of small loan companies is also related to operational pressure. In recent years, as the trend of industry differentiation intensifies, some small loan companies are facing declining revenues, net profits, and increasing non-performing loan ratios.
On January 7th, Zhaofeng Small Loan Co., Ltd. in Lin’an District, Hangzhou City, announced that it would cease its stock listing starting from January 8, 2025. In the first three quarters of 2024, Zhaofeng Small Loan achieved a net profit attributable to the owners of the parent company of only 50,400 yuan, a decrease of 99.75% year-on-year; its operating income was 18.46 million yuan, down by 42.05% year-on-year. The company’s semi-annual report for 2024 showed that in the first half of 2024, Zhaofeng Small Loan had non-performing loans amounting to 33.8646 million yuan, an increase of 142.07% year-on-year; the non-performing loan ratio was 11.16%, an increase of 7.46 percentage points compared to the previous year.
Some netizens believe that the decline of the Chinese economy, reduced income of the people, and a decrease in loan demand are also reasons for the departure of these small loan companies.
User 0939461 from Tencent commented: “It’s meaningless. With the economic downturn, fewer people are taking out loans, and the acceptable interest rates have also decreased, making the existence of small loan companies obsolete.”
Overall, as of the end of September 2024, the number of small loan companies in China was 5,385, a decrease of 35% from the peak period in 2015.