Alibaba’s Push into Financial Services to Grow and Make Easier Global Business

The evolution of China’s e-commerce market is very fast. Some of the changes have the potential to be transformational.

Back in 2009, Alibaba, the Chinese e-commerce company, introduced a service which provides loans to merchants who sell through the company’s web platform. The fundamental problem inspiring its creation was that some online merchants sufficient lack cash up front to buy the amount of inventory they hope sell on Alibaba.

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As of September 2012, Alibaba, China’s most successful e-commerce company, had supported more than 15,000 of its merchants with an average of $7,400 distributed per loan. Alibaba’s lending is not restricted simply to its merchants. The company has also teamed up with major financial institutions, such as the China Construction Bank, to provide an array of loans to small and medium-sized enterprises (SMEs) more generally. This operation, run through the Alibaba Group’s Alibaba Financial Company, is driven not simply by the e-commerce giant’s desire to increase transactions on its web platform, but rather by a general niche in the Chinese micro-finance market.

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