Alipay, China's largest third-party payment service provider, has teamed up with the country's policy bank to offer interest-free loans to poor college students.

Owned by Alibaba Group Holding Ltd's finance arm Ant Financial, Alipay said recently it is expected to help China Development Bank offer as much as 18 billion yuan ($2.78 billion) worth of loans to students this year.

The wholly State-owned policy bank is responsible for offering the cash and reviewing contracts with borrowers, while Alipay is in charge of the process, from helping students to apply for the loans, setting up accounts that can receive the loans, right through to repaying the borrowed money after students' graduation from college.

The service offered by Alipay, which had 450 million active users in 2015, makes it easier for students to borrow and repay their loans as they can do it anytime anywhere using their smartphones.

"Knowledge can change people's lives, while many unfortunate college students have to give up their dreams because their families cannot afford tuition fees," said Alipay in a statement, adding the zero-interest-loan project will effectively prevent some students from dropping out of schools.

According to Alipay, the two partners have offered more than 75 billion yuan in loans to more than 7 million poor college students in China over the past six years, creating one of the largest public welfare projects in the country.

No mortgage is needed for qualified students to apply for such loans, and they remain interest-free until graduation.

Students at vocational colleges can each borrow up to 8,000 yuan from the project while those in postgraduate schools can borrow up to 12,000 yuan.

Alipay said that on average students borrow 7,000 yuan from the project.

According to Alipay, the company is working to include students' ability to pay off their debt into its credit rating system.

The system, Sesame Credit, values people's credit history, behavioral habits, ability to pay off debt, personal information and social networks, giving users a credit score of between 350 and 950.

Alipay said that the credit rating system can work as an catalyst to encourage students to pay off their debts on time.

But it won't take the credit score into consideration when it comes to deciding whether or not a student in poverty can be granted a loan or not.

mengjing@chinadaily.com.cn

(China Daily USA 04/21/2016 page15)