Private online lending deserves credit(4)

What might help

Despite the risks and challenges, Bai thinks the lending websites should be encouraged. "We should give some credit for their financial innovation. Financial policies and regulatory authorities should take a positive attitude toward them and develop targeted policies for regulation."

China's central bank has a team drafting a lenders' law to establish a legal framework to regulate private lending.

Bai and founders of P2P websites suggested that China's financial regulators lower the threshold of getting a financial license so these companies could operate within proper regulations.

"Regulation will be good for the future growth of the fledgling industry," Renrendai's Yang said. He said P2P websites have explored ways to create their own system of risk control and credit rating, and in the future, it will also be helpful to the development of credit rating in China.

"No matter how the future looks for these P2P lending platforms, as a financial innovation, they have played a huge role in the promotion of a multilevel credit market and the building of inclusive financial systems," Bai said.