MICROCAPITAL BRIEF: Chinese Internet Companies Alibaba, Baidu Offer Financial Services Through Subsidiaries Yu’e Bao, Baifa

Internet companies in China reportedly are increasing financial inclusion through services such as Yu’e Bao, an online savings and investment product of e-commerce player Alibaba Group, and Baifa, an online “wealth management” product launched by search engine Baidu [1]. Yu’e Bao, which was launched in June 2013 as part of Alibaba’s “Microfinance Services Group”, reported 43 million clients and deposits of USD 30.4 billion as of December 2013 [2]. Yu’e Bao accepts amounts as small as USD 0.17 and offers interest rates that have averaged an annual rate of 5 percent. Yu’e Bao plans to expand its services to provide microloans to small and medium-sized enterprises (SMEs). Baifa offers an annual interest rate of 8 percent on deposits. While financial data on it are not available, Baifa reportedly raised USD 165 million from 120,000 customers on the day it launched in October 2013.

Both Alibaba and Baidu, as well as other internet companies, have applied for licenses from the Chinese government to offer a wider range of services such as loans, insurance and alternative payment methods, such as electronic and mobile payments [3].

By Nisha Koul, Research Associate

About Alibaba Group: Founded in 1999 in China, Alibaba Group is a family of e-commerce businesses that include consumer e-commerce, online payment platforms, business-to-business marketplaces, mobile applications and internet television. US internet company Yahoo owns 24 percent of the group. In June 2013 Alibaba launched Yu’e Bao, an online savings and investment product. As of December 2013, Yu’e Bao reported deposits of USD 30.4 billion and 43 million clients. During the quarter ending in September 2013, Alibaba reported an operating profit of USD 786 million on revenue of USD 1.78 billion [3].

About Baidu: Baidu, founded in 2000, is a web search engine based in China. It also operates a search engine in Japan. It launched Baifa, a wealth management product, in October 2013 that raised USD 165 million from approximately 120,000 clients on the day of the launch. As of September 2013, Baidu reported total assets of USD 10.5 billion [4].

Sources and Additional Resources:

[1] International Business Times, “Alibaba And Baidu Inc. (BIDU) Revolutionize China’s Financial Sector, By Bringing Together Microfinance And The Digital Age,” http://www.ibtimes.com/alibaba-baidu-inc-bidu-revolutionize-chinas-financial-sector-bringing-together-microfinance-digital

[2] Caijing.com, “Internet Banking: A Two-Horse Race,” http://english.caijing.com.cn/2014-01-07/113785123.html

[3] USA Today, “Yahoo falls on cautious forecast, Alibaba slowdown,” http://www.usatoday.com/story/tech/2014/01/28/yahoo-fourth-quarter-results/4966623/

[4] Baidu, 2013 Financial Reports, http://ir.baidu.com/phoenix.zhtml?c=188488&p=irol-reportsAnnual

MicroCapital Story, August 15, 2013, “People’s Bank of China (PBC) Reports Growth of Microcredit Sector in Country,” https://www.microcapital.org/microcapital-brief-peoples-bank-of-china-pbc-reports-growth-of-microcredit-sector-in-country/

MicroCapital Story, February 4, 2013, “E-Commerce Companies 360buy, Suning Appliance to Offer Consumption Loans in China to Compete with Alibaba,” https://www.microcapital.org/microcapital-brief-e-commerce-companies-360buy-suning-appliance-to-offer-consumption-loans-in-china-to-compete-with-alibaba/

MicroCapital Story, April 15, 2013, “China Microfinance Institution Association (CMIA) to Introduce Credit Rating System for Microfinance Institutions As Early As July 2013,” https://www.microcapital.org/microcapital-brief-china-microfinance-institution-association-cmia-to-introduce-credit-rating-system-for-microfinance-institutions-as-early-as-july-2013/

MicroCapital Story, January 16, 2013, “Microcredit Loans in China Increase 52% to $96b in 2012,” https://www.microcapital.org/microcapital-brief-microcredit-loans-in-china-increase-52-to-96b-in-2012/

MicroCapital Universe Profile, Alibaba Group, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Alibaba+Group

MicroCapital Universe Profile, Baidu, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Baidu

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