Funding a better future for Chinese students

case of China, the government caps the interest rates that non-bank lenders can charge. The policy appears to protect poor borrowers from high interest rates, but actually reduces the funds available to borrowers since microfinance lenders that cannot issue a loan profitably at the set interest rates will not lend money. The result is a surplus of prospective borrowers and not enough money to go around -- a situation Qifang hopes to avoid.

"There are a couple of reasons why our interest rates might be lower. First of all, our overhead is different. We don't have loan officers walking out to villages, so the cost of serving a loan is going to be different and, therefore, can be lower than it would in a traditional microfinance model," Chin said.

Another reason lenders may offer lower interest rates through Qifang is for social reasons, such as a desire to help society by funding low-interest loans for students.

"Where there's a career-development component or a social benefit, or corporate social responsibility aspects, then you're going to see a tolerance for a lower rate of return," he said, adding the site plans to soon expand beyond loans into grants and scholarships.

That's good news for Chinese students, and China's future.