TIANJIN, China (Reuters) - In a mobile phone shop in Tianjin, northeast China, Jiao Zhiwen sells about 220,000 yuan ($32,000) in small loans each month, one of hundreds of thousands of loans agents helping to fund the country's unprecedented consumer spending spree.
Though seven in 10 customers have never financed a purchase before, most loans are processed in 25 minutes, with a basic ID check and proof of a bank account.
Jiao's store on a busy commercial road, among furniture and enamel factories, is on the frontline of a consumer finance revolution in a country with a fast-growing borrowing culture, a government keen to boost spending, but still no provision for personal bankruptcy.
"They are factory workers, construction laborers and shop assistants," Jiao says of her clients.
"They need to feel they should only dig a little money out of their pockets each month and not too much at one time."
Jiao works for Home Credit China, among the handful of small-loans firms to receive national licenses over the last three years to offer modest, mostly high-interest, loans to bring China's roughly 300 million under-banked adults into its $3.9 trillion consumer finance market.
Beijing wants its high-saving population to have greater access to credit, so personal consumption can take over from industry and infrastructure spending as the key driver of growth.
Zhang Xiao, 22, a student at Shanghai University, embodies the change in attitudes, taking a 500 yuan loan to buy clothes over the Lunar New Year holiday.
"If, before, the price was quite high, I might just have chosen not to buy something. Now with this sort of loan I can buy first and only then have to think about paying the money back slowly."
But in a country where credit records are scattered, most adults don't have a borrowing history and collecting delinquent loans can be slow, the transition could usher in a wave of personal defaults.
Mao Wanyuan, who helps supervise non-bank financial institutions at China's banking regulator, told reporters in December that inclusive finance firms still lacked adequate experience to manage risk.
For Home Credit and other nationally licensed consumer finance firms like Suning Consumer Finance Co, big data, as employed by Jiao on her tablet, is the answer - determining how much they can lend, to whom, and when.
"The banks wouldn't touch a lot of our clients," said Ondrej Frydrych, chief executive of Home Credit China, which is backed by Czech billionaire Petr Kellner's investment firm PPF Group PPFGP.UL and has 145,000 point-of-sales (POS) operations in 312 cities.
"Our choice is either we can play it safe, have low risk, and approve only people with a good record or people we think can repay - or be more inclusive."
His bet is that as customers become wealthier, loans will become bigger and more profitable.
For now, mobile phone loans are the industry's big mover – Home Credit finances 8 percent of all Apple iPhones sold in China.
Judging by developments in emerging markets like Brazil and India, there are big risks in small loans.
John Chen, China managing director for credit rating services firm FICO, says lenders need to use "alternative data", from mobile phone charges to travel bookings, to compensate for the lack of credit bureau coverage.
Home Credit uses a scoring engine based on items from the predictable disposable income and age of the borrower, to the shop's own history of bad credit to determine risk levels.
It also checks with the central bank's own credit database to ensure applicants haven't previously defaulted.
Home Credit chases delinquent borrowers through three call centers employing 5,000 people, before handing them over to collection agencies. It also maintains a 20-person anti-fraud unit.
At Suning Consumer Finance Co - backed by home appliances retailer Suning Commerce Group (002024.SZ), Bank of Nanjing Co (601099.SS) and BNP Paribas Personal Finance - a spate of frauds when the firm launched 21 months ago led to a tighter customer verification system, said general manager Chen Ming.
Suning's system now uses facial recognition, real-name and bank-card authentication software, alongside online consumer information from its shopping website to verify applicant identities and then track loans after they're issued.
So far, the volume of bad loans has been limited, averaging 4.1 percent at the end of September for licensed firms. Home Credit says its "loss of sales" fell below 4 percent in November for POS loans, and slightly higher for cash loans.
But industry executives expect the figures to deteriorate at all firms as portfolios mature and coverage widens.
Consumer finance firms started receiving China Banking Regulatory Commission (CBRC) licenses only in 2010 and still account for less than 1 percent of the total personal lending offered by commercial banks, petty loan companies, and online platforms.
Nationwide, total outstanding consumer lending in 2016 reached 26.76 trillion yuan ($3.9 trillion), up 282.5 percent on 2011, according to Euromonitor International, which is forecasting it could reach 35 trillion yuan by 2021.
"People's ideas about borrowing are changing," says Jiao in Tianjin. "A customer borrowing a few thousand yuan today may return later for a bigger cash loan."
Reporting By Matthew Miller; Editing by Clara Ferreira Marques and Will Waterman