Credit success in China

A financial conglomerate is making its mark in consumer loans and immunotherapy cancer treatments

The Czech conglomerate PPF Group took a decade to expand its presence in China, and its hard work has been repaid in growing revenue and consumer trust, company officials say.

Its subsidiary Home Credit has become a leading foreign lender to consumers in China, having provided services to more than 6 million Chinese customers, created 20,000 jobs, and its financing capacity has triggered a flow of more than 25 billion yuan ($4 billion; 3.2 billion euros) in economic demand.

HCC provides loans on motorcycles and consumer durable goods through retailer networks in China as well as cash loans.

"Consumer financing is an important part of any economy as it accelerates economic growth, and we try to bring these benefits to China," says Mel Carvill, a member of the board of directors at Home Credit.

"In China, we focus on consumer education so our customers understand exactly what service we provide them, so in turn we win consumer trust."

Home Credit's operations cover 14 Chinese provinces and more than 150 cities, and it has more than 30,000 points of sale where transactions occur.

Point-of-sale loans enable durable goods to be bought and paid for in installments. The loans are sold to borrowers at shops as durable goods are bought.

PPF was founded in the Czech Republic in 1991 as an investment fund and participated in the privatization of the local economy after the fall of the Czechoslovak Socialist Republic in 1989.

Although originally specializing in financing, retail banking and insurance, in more recent years its operation has expanded to include a diverse range of sectors including medical and telecommunications.

Home Credit initially opened a representative office in Beijing in 2004 to focus on researching the market before expanding operations there.

"We approached the market tentatively initially to learn more," says Radek Bednar, chief sales officer of Home Credit China.

In 2007, Home Credit China launched its consumer finance operations in Guangdong province, after having developed a tailor-made business model based on both operational and funding agreements with leading Chinese financial institutions such as China Development Bank and Fotic Trust.

In 2008 HCC expanded its operation to Chengdu, Chongqing and Tianjin. It established a strong relationship with thousands of retailers and local shop owners nationwide, which enabled it to build up a broad point-of-sales network. The back office, located in Shenzhen, Guandong province, is capable of processing more than 100,000 applications a day.

HCC also has one of the market's most developed IT infrastructures and call centers, the company says. Its Wuhan call center was established in 2010, with a capacity to host more than 4,000 customer service representatives, and now averages more than 450,000 calls a day.

In February 2010, Home Credit received approval from the China Banking Regulatory Commission to establish a consumer finance company in accordance with new legislation adopted in 2009.

Known as the Home Credit Consumer Finance Company, it became the first such non-banking organization in China to be solely owned by a foreign investor. The company in Tianjin now provides a range of support including cash loans to finance purchases of durable goods, education or travel.

Bednar says that HCC is keen to focus on consumers including young couples, blue-collar workers and farmers, who are perhaps neglected or priced out by traditional lenders.

"Those customers often do not have a credit record, and know very little about consumer financing as they previously have had no contact with lending institutions, and traditional lenders are reluctant to lend to them," Bednar says.

About 80 percent of these customers are in the 25-40 age group, and a consumer finance loan may be the first financial service product they use, he says.

"To attract these customers, we focus on customer education, which will allow them to understand how consumer finance works. We speak to them through call centers and we give lectures, which they can come along to," Bednar says.

The law requires lenders to notify customers about the total to be repaid and to allow a period for customers to change their minds. But HCC officials say they go above the requirements by clearly spelling out how much needs to be repaid each month and allowing customers 15 days to call HCC back and ask for a change, which is double the time allowed by some competitors.

"We are very transparent about our products and aim to be a responsible lender," Bednar says.

Apart from Home Credit, the PPF subsidiary Sotio is also very active in China. Sotio, a biotechnology company focusing on developing cellular immunotherapy for the treatment of cancer, opened a laboratory in Beijing this year.

It is Sotio's second laboratory, following one opened in 2010 in Prague, where the company's headquarters are located.

Sotio's China laboratory produces therapeutic products for patients diagnosed with prostate and lung cancer. Together with back-office facilities, the Sotio China laboratory occupies an area of more than 3,500 square meters.

Seventy Chinese work in the laboratory, but the number is expected to increase to 200 when full operational capacity is reached.

(China Daily European Weekly 10/10/2014 page16)