Shrink to fit

Ant is exiting its mutual aid insurance platform Xianghubao

Ten years ago Muhammad Yunus’ Grameen Bank was a topic for widespread debate in the Chinese market. Entrepreneurs and government officials alike hoped to copy the Nobel Peace Prize winner’s model as part of the wider effort to tackle poverty. Yunus even teamed up with Alibaba in 2009 to launch Grameen China with a goal of serving more than 24,000 borrowers over the next five years.

Microcredit services and mutual aid programmes for the economically disadvantaged and unbanked are still being encouraged by Beijing. But the problem is that regulators don’t want too much of this banking activity to flow through internet platforms owned by companies such as Alibaba’s Ant Group.

Regulatory focus on Ant picked up in intensity in November 2020 when an eleventh-hour intervention from the government scuppered its $30 billion dual listing in Shanghai and Hong Kong. Alibaba’s fintech arm has since been instructed to undergo a business revamp in a bid to reduce potential systemic risks in the way that it matched lenders with borrowers.

The review is still ongoing but Ant’s business scope has just been scaled back further after it announced that it will close its Xianghubao mutual aid insurance platform later this month.

Translating as ‘guaranteeing each other’ in Chinese, Xianghubao was launched in 2018, primarily to help people pay for medical procedures. It quickly grew into the world’s biggest mutual aid platform with more than 100 million registered users (see WiC430). A number of rival services operated by the likes of Baidu and Meituan closed down as banking regulators stepped up oversight of the sector in late 2020.

Ant meanwhile has been partaking in its own ‘mixed ownership reforms’ to stem the backlash from officialdom by bringing in investment from state-owned enterprises in a number of its other faster-growing units. Its consumer credit and microloan services were merged into a vehicle controlled by the local government of Chongqing (where the idea of internet-based microloans was pioneered in China), for instance. The state-backed asset manager Cinda also bought a stake in the vehicle in December.

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