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Operator
Hello, ladies and gentlemen. Thank you for participating in the third quarter 2022 earnings conference call for Finvolution Group. At this time, all participants are in listen-only mode. After management's prepared remarks, there'll be a question and answer session. Today's conference call is being recorded. I'll now turn the call over to your host, Jimmy Tan, head of investor relations for the company. Jimmy, please go ahead.
Jimmy Tan
Thank you, Anthony. Hello everyone and welcome to our third quarter 2022 earnings conference call. The company results were issued via newswire services earlier today and are posted online. You can download the earnings release and sign up for the company email alerts by visiting the IR section of our website at ir.fimbigroup.com. Mr Feng Zhang, our Chief Executive Officer, and Mr Jia Yuan Xu, our Chief Financial Officer, will start the call with their prepared remarks and conclude with a Q&A session. During these calls, We will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release. Before we continue, Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Finally, we post a slide presentation on our IR website providing details of our results for the quarter. I will now turn the call over to our CEO, Mr Feng Zhang. Please go ahead, sir.
Anthony
Thanks, Jimmy. Hello, everyone, and thank you for joining our earnings call. With China's microenvironment rebounding gradually from the low points of the second quarter, Our domestic operation is also demonstrating progressive improvements. Powered by our proven strong track record in strategic execution, our industry-leading technological capabilities, and our diversified borrowers across China, our business remained resilient. We continue to deliver solid financial and operational performance despite rolling lockdowns affecting multiple cities in China. Although we are experiencing pockets of improvement in terms of both pandemic restrictions and the macro environment, our operations in the third quarter remain challenging. We continue to adapt to navigate these challenges by leveraging our advanced technological capabilities as well as our experienced management team of seasoned leaders who have successfully traversed multiple credit cycles during our 16 years of operations. Our total transaction volume in the third quarter reached RMB 45.5 billion, representing sequential growth of 10% and year-over-year growth of 19%. Concurrently, our total outstanding loan balance reached RMB 60 billion, representing an increase of 7% sequentially and 34% year-over-year. With the completion of our business transition, our proportion of category A and B borrowers in the domestic market who meet our highest credit standards, further expanded to 75% of our total borrowers in the third quarter, compared to 58% in the same period last year. We are also pleased to share that we have completed our pricing transition and the current average borrowing rate for our loan is around 23%, reflecting our commitment to promoting financial inclusion as well as our increased compliance level and alignment with the regulatory directives. Technological innovation remains the cornerstone of our operation, empowering us to achieve consistent performance during challenging periods. Ongoing adjustments have been made to our credit risk assessment models, adapting to the COVID lockdown environment, which enabled a steady and progressive growth while our risk performance has very fluctuated, even during the Shanghai lockdown. These solid operational results are mainly due to our sophisticated cutting-edge technologies, such as MatchCube, our all-in-one fund management platform, which supports a wide variety of protocols and effectively matches institutional funds with borrowers in real time. It can operate up to 55 fund management projects simultaneously with a daily processing capability of over 50,000 cases. Boasted by a prudent and effective risk management framework, coupled with reliable credit risk assessment models and a fraud detection system, we have improved our risk metrics on multiple fronts. Our day one delinquency metric was 5.5% in early November, while delinquency rates below 90 days as of September showed further improvement to 1.34% from 1.44% in the previous quarter. As the impact of rolling lockdowns become more manageable, we expect our vintage delinquency rate for third quarter to remain stable at around 2.3%. Encouragingly, our loan collection recovery rate also remained stable and strong at above 90%. Separately, we continue to take a prudent approach towards supporting small business owners. In the third quarter, we served a total of 504,000 small business owners and facilitate IMB 11.3 billion of loans for this segment, representing 25% of total transaction volume, an increase of 43% from the same period last year. Our small business owners are spread across various Chinese cities in different industries, such as retail, wholesale, and light manufacturing, among others, which further reduces our related risk through geographic and sector diversification. We would also like to highlight that around 60% of our small business owners have been in operation for more than three years, illustrating their overall stability. We will continue to monitor the economic recovery and gradually adjust our strategy to keep up with the pace of small business recovery. Moving on to our international expansion, we are very excited to report that with improvements across multiple operational fronts, revenue contribution from this segment reached 12% of total revenue in the third quarter, marking the first time our overseas revenue contribution exceeded double digits. We also refined our international branding strategy, producing stellar results across numerous operational metrics, such as the number of such as number of downloads, number of new registrations, and the conversion rates. These achievements earn our Adakami application a spot on Apple's Search Ads success story page, a notable commendation of our strategy's effectiveness in reaching new audiences. With stronger branding in the local market, our transition to better quality borrowers in Indonesia has outpaced our expectations. with the proportion of better quality borrowers in the third quarter expanding to 68% from 62% in the previous quarter. Coupled with Indonesia's improving macro environment and an easing COVID-19 policy, this brought transaction volume in international markets to RMB 1.1 billion, representing a sequential increase of 22% and a year-over-year increase of 6%. The ongoing transition to better quality borrowers also helped us deepen our relationship with local funding partners. Evidenced by an expansion in the proportion of loans, they facilitated to 48% in the third quarter, compared to 39% in the previous quarter, and in sharp contrast to zero local funding in the same period last year. Looking ahead, we are confident in our ability to further increase the proportion of loans funded by local financial institutions as we secure more local funding partners with a large number of better quality borrowers. Even more excitingly, our international outstanding loan balance reached IMD's 640 million, representing a sequential increase of 33% and a year-over-year increase of 88%. Our outstanding performance in the Indonesian market clearly demonstrates that we can leverage our technologies and business models in the overseas markets. Going forward, we are confident that the revenue contribution from international markets will continue to increase and that we can replicate these achievements in the Philippines and other suitable countries. Last but not least, I'd like to provide an update on our ESG performance. We continue to make strides in advancing our ESG initiatives and doing our part for the environment this quarter. Notably, we obtained the ISO 14064 verification from SGS, a well-known international standard certification organization. ISO 14064 provides industry and the government with a set of tools to develop programs aimed at reducing greenhouse gas emissions This verification is a powerful global acknowledgement of our environmentally sustainable efforts in pursuing carbon footprint reduction and will ensure that our reporting is reflected internationally. In summary, our STERIL results in the third quarter of 2022 speak to our resilient business model, state-of-the-art technologies, and extensive operating experience and resources. Looking ahead, we will continue to focus on acquiring better quality customers, refining our credit risk profile and management framework, while pursuing premium quality growth opportunity in China and abroad. Taken together, we believe that these efforts will position us to smoothly navigate the rapidly evolving market while delivering sustainable growth and creating great value for our customers, shareholders, and all stakeholders. With that, I will now turn the call over to our CFO, Jia-Yuan Xu, who will discuss our financial results for the quarter.
Jimmy
Thank you, Feng, and hello everyone. Welcome to our third quarter of time funding to earnings call. In the interest of time, I will not go through all of the financial items on this call. Please refer to our earnings release for further details. As Feng mentioned, despite multiple operational challenges in the third quarter, we are encouraged that our quarterly results were in line with our expectations, including quarterly transaction volume, improvement in risk metrics, and the strength and gains in our international business, among others. With a larger number of high-quality borrowers coupled with our successful pricing transaction and advanced technologies, our founding partners are more willing to offer us attractive interest rates evidenced by our funding cost improvement to 7.1% in third quarter from 7.5% in the previous quarter In addition, the cumulative number of our institutional partners expanded to over 70 with a robust pipeline of potential partners in place Going forward, we plan to diversify our funding channels through ABS and secure a wide range of financial institutions to further optimize our funding cost Driven by our relentless efforts to optimize our operations Effective execution of our overall strategy and skillful deployment of our technological capabilities across business Our net revenues for the third quarter grew to around RMB 3 billion of 18% year-over-year. We also delivered a healthy non-GAAP operating profit of RMB 683 million. Our capital light model proportion also remained stable at around 18%, and we expect to maintain this proportion near the current level going forward. Our leverage ratio which is defined as risk-bearing loan balance divided by shareholders' equity remained stable at 4.2 times. Thanks to the continuous improvement in funding costs, our stable risk performance and consistent investment in research and development, we have managed to maintain positive results in our business operations. Going forward, we will continue to closely monitor the trends in funding costs and the risk metrics. Between January 2022 and October 2022, we deployed around USD $40 million to buy back our shares in the public market. Since we initiated our share repurchase program in 2018, we have cumulatively deployed around USD $171 million to buy back our shares on the public market. Attestments to the company's commitment to retaining value to shareholders are a long-term basis. Before I conclude my remarks, let me provide some additional color to our business outlook for the fourth quarter of 2022. Despite the challenging microenvironment in China, we will continue to forge ahead by strengthening our international initiatives, optimizing operational efficiency, reinforcing our successful transactions to higher-quality borrowers, and propelling technological innovation. We would like to reiterate that our total transaction volume guidance for the full year 2022 remains unchanged in the range of RMB $100 and $75 billion, to RMB $180 billion, representing year-over-year growth of 27% to 31%. With that, I will conclude my prepared remarks. We will now open the call to questions. Operators, please continue.
Operator
We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause our material to assemble our roster. Our first question will come from Yada Li with CICC. You may now go ahead. Pardon me. You may now go ahead.
Yada Li
Hello, everyone. Thank you for giving me this opportunity. I'm Li Yada from CICC. Today, I would like to ask two questions to the management team. The first is that in the consumer finance industry, we see that the overall growth rate continues to slow down. Compared to the same industry, we can still achieve a growth rate of more than 10% of the same rate. Can you further help us understand the reason why new technology can achieve faster growth and whether it can continue to get higher than the industry and the same industry in the future? This is my first question. The second question is for our international industry. Okay, then I'll do the translation part. So the first one is compare with our peers and we will achieve higher growth rates on lower origination volume, aiming the slowing growth of the whole consumer finance market. So could you please elaborate more about the reasons and looking forward, is it possible that we can keep up going at a higher growth rate compared with the market and our peers. So this is the first one. And the second one is regarding the international business. So how much it will contribute to our new loan sales and the total revenue by the end of this year and next year. Thanks.
Jimmy
Thank you, Ada. Let me answer your first question. From the whole situation of the third quarter, we did find that In fact, the whole red line environment is still in a very complex situation. In the second quarter, we experienced such a division based on injuries. In the third quarter, there is still a situation of division of control in some areas. It should be said that the situation of the epidemic is still very obvious to the economic impact. And the corresponding consumer confidence is also in a relatively low position. That can be in the external environment, without any obvious changes, we can still achieve such a relatively stable, such a business result. Our three-season trade deal has disturbed 45.5 billion. In fact, this is also a reflection of our resilience in business management. There are several reasons behind this. The first is the success of a strategy on a high-quality crowd. A few years ago, we began to deploy a strategy on a high-quality crowd. uh uh So this is the second one. The third one is that in terms of our core technical capabilities, we have had a lot of success over the years. Here I can give an example. In this epidemic, because the epidemic is now a very big challenge for the entire business, Accordingly, in terms of the risk model, we have also made a more detailed adjustment. In terms of the model, we are targeting the control policies of different regions, including high, middle and low risk areas in this area. We will all use a more specific epidemic management parameter to make a distinction. For example, if there is an epidemic in a certain region, In two days, we will be able to implement rules related to this relay. At the same time, it can also be used for some special situations in each region. It has a customized strategy model so that we can make such a risk adjustment more accurately for epidemic control. From the future, I think the entire domestic environment is still very complicated. Some Let me do the translation for Alexis.
Jimmy Tan
During the third quarter, the situation still remained complicated. For example, in the Q2, we experienced the Shanghai lockdown and consumer confidence is still relatively weak. And of course, the resurgence of the COVID has affected the macro environment with rolling lockdowns. And despite the macro environment remained largely unchanged, we still managed to achieve positive results. Total loan origination volume in the third quarter reached RMB RM45.5 billion, validating the resilience of our business. This is due to several reasons. For example, our experience accumulated in navigating multiple credit cycles, our successful business transitions to better quality borrowers, which enable us to achieve positive results during uncertain times, and also our technological capabilities accumulated over the years. Let me share an example of the COVID situation with you. For example, when we encounter a situation of lockdown, We will make ongoing adjustments to refine our risk models tailored to different categories of risk areas such as low, medium, high. When an area has been identified as a risk area, we will monitor and make the necessary adjustments to the models and rules within two days. And specific strategies will also be tailored for different areas. As a result of our proactive strategy, we have made very positive improvements. For the outlook, the microenvironment is complicated and without major changes in the core policies and with the uncertainty still persist in the economy. Although loan demand remains stable, but there might be some fluctuations in the future. And on the longer term, we are still very confident of the growth in China consumer markets.
Jimmy
I will answer your second question. Taiwan Taiwan Taiwan Taiwan ah ah This has reached 6.4 billion, with a 33% growth rate. From the following few records, including next year, we are still very confident in the entire overseas business, because although the entire global environment is also more complex, there is a certain uncertainty. In contrast, we are now focusing on Indonesia, the Philippines, and these markets. In terms of the overall environment, its certainty will be better. So we will increase such a share in the corporate market. Specifically, in the Indonesian market, we will continue to serve the customer base during the growth of the transaction volume. In the third quarter, our high-quality customer base has actually reached 68%. Compared to the second quarter, 62% has been further improved. At the same time, the quality of the customer group has been improved, and our cooperation with the local financial institutions has also been constantly increasing. In the past, we mainly cooperated with Bank of Chicago. At present, we have expanded to three companies. We will continue to maintain this trend, and will continue to introduce more local cooperation partners, while exploring more diversified cooperation methods. So this is a situation in Indonesia. In addition, in the Philippines, our development speed is also very fast this year. We are very confident that we will copy the experience of Indonesia and Indonesia's success to the market in the Philippines. At the same time, we will also explore some relatively new products in the local area, such as the offline consumption scene of commercial department stores.
spk00
Hello Yada, let me do the translation for Alexis again.
Jimmy
Our international business transition to better quality began in the second half of
Jimmy Tan
and we have also reported successful transition in different stages since the last quarter. And during the third quarter, we continue to strengthen our international business and revenue contribution from this segment, which double digits of revenue contribution in the first time this year. Transaction volume in the third quarter reached RMB 1.1 billion, representing a sequential increase of 22% and concurrently, Outstanding loan balance also reached RMB 640 million, representing a sequential increase of 33%. And going forward, we are confident for our international markets because the policies in Indonesia and Philippines are much more confirmed right now. And in the Indonesia market, our transaction volume is increasing along with the transition to better policy borrowers. In the third quarter, our proportion of better quality borrowers increased to 68% compared to 62% in the previous quarter. With a larger of better quality borrowers, we are actually working with more local financial institutions right now. We are working with Bank Jagos and another two local financial banks. Going forward, we are confident to further increase the proportions of loans funded by local partners. And for the situation in Philippines, we are competent to replicate our success into Philippines and other suitable countries. And we are also actively exploring new products such as working with hypermarkets to develop consumption scenarios. And besides, Indonesia and Philippines were also actively evaluating new countries and markets searching for the suitable local partners looking for licenses, and we believe our technologies and capabilities can be leveraged into more countries and financial institutions. We believe the growth in the international markets will continue at double digits with continued increase in revenue contribution.
Jimmy
Okay, operator, please continue.
Operator
Okay. For the benefit of all participants on today's call, if you wish to ask a question to management in Chinese, we ask that you please kindly repeat your question in English. Thank you. Our next question will come from Alex Yee with UBS. You may now go ahead.
Alex Yee
Good morning. I have two questions here. The first question is about a look at next year. I know that we may not have reached a time point to discuss a guidance for next year, but from a more directional discussion, because recently there has been a lot of discussion about the release of COVID-19 control measures for next year, and there are also a lot of signs. I would like to ask And how do we balance growth and risk? And if next year we see a stable promotion of reopening, how will that affect our pace and strategy for growth next year? That is to say, we may want to see what kind of signs we will feel more at ease to pursue a higher growth. That is the first question. The second question is about So I have two questions. First one is in terms of your outlook for the next year. I understand that you're not in a position to discuss your guidance for the next year, but just want to get your color on your direction and strategy. So even now China has a lot of discussion about the reopening and we have seen more concrete measures being deployed. So I'm wondering how do we balance your growth and risk management for the next year? And if we do see China pushing ahead, with the reopening sometime next year. So how would that affect our growth, the pace of our growth? In other words, what kind of activities or science do we need to see such that we will be more comfortable with our growth? And the second question is on your sales and marketing expense for this quarter. It's up quite a lot financially, so I'm wondering to what extent that is related to domestic or international markets. What are the key drivers for increase and outlook ahead? Thank you.
Jimmy
Thank you, Alex. I will answer the first question first. I think the first question I would like to share is our company's overall strategic thinking. Because we are not just a domestic online lending business. Ah, So in such a big environment, we think that we will pursue a more high-quality, more stable development of such a business model. Specifically, we will look at a few things. The first is that we will make a more suitable distribution of assets. We have actually managed to get out of Southeast Asia successfully. Now this ratio is no longer increasing. So in the future, we will continue to increase the asset layout of overseas and increase the ratio of overseas income. The second is that we will choose the right users. Because in this complex environment, in fact, we also found that relatively better users are more sticky and have better risk resistance and more stable. So in our business data, we can see that although the environment has changed, our core data is still very stable. The third is that we will also pursue a more suitable state on our natural resources table. We need to maintain a sufficient limit reserve, and then it is also a relatively relatively safe level of energy efficiency.
Jimmy Tan
Hi Alex, this is Jimmy. Let me do the translation for Alexis. Let me share the company strategy with you. We are not only a domestic, our business is not only in the domestic market today, but because we also have an international business. The global situation is still complicated and if you take a look, there are different policies in each different country. What we are trying to look to now is to pursue high quality. And this can be reflected in a number of ways. For example, increasing the overseas market revenue contribution and penetration into more markets and finding the right customers. These customers will have much more loyalty and be much more resilient in a complicated environment. And number three, have an appropriate balance sheet with sufficient cash reserve and have a safer leverage to navigate challenges in a complicated environment.
Jimmy
Then back to the domestic situation, it should be more complex than the entire big environment. As I mentioned earlier, we are more concerned about the policy of the epidemic. Although there are some positive signals now, but in fact, the final impact on the economy and the future trend of the economy is still quite uncertain. So from now on, I think we will continue to observe this relatively cautious approach, especially to observe China's economy, including consumer confidence index, and these changes in data related to our business. If these data appear to be confused, then we will Hi Alex, let me do a translation.
Jimmy Tan
Environment in China is much more complicated. Although we have experienced or seen positive signs resurfacing in the recent days, but the impact on the economy is still uncertain on the overall level. we will still need to monitor certain reports such as the China Consumer Competence Index. And of course, we will make the appropriate adjustments when we see any improvement in these signs.
Jimmy
The second question is about the cost of goods and services in the three-week period. Indeed, according to the data, the cost of goods and services in the three-week period has increased. In general, we think it is still in a very healthy state. Because if we evaluate the investment of the customer, we mainly look at the LTV of the customer. In our three seasons, we can actually see that our core indicators, especially capital costs, continue to get a very significant optimization. So this means that we can also have a greater space on LTV. So far, we have been able to achieve profit in 18 months. But most of our clients' life cycle is more than 36 months. So our business is very healthy. And then our third quarter is actually in terms of goods, which is also a lot of investment compared to the second quarter. So this will also bring an increase in the cost of editing. Of course, we also found that there is still room for optimization in terms of the turnover of the entire customer. We also made some corresponding strategic adjustments in the fourth quarter. In October, we also saw that our customer costs have increased by more than 10% in Feibia. In the future, we will continue to optimize the channel of the customer and control the cost.
Jimmy Tan
Alex, let me do the translation for you again. From the P&L perspective, you can see that our sales and marketing cost has been increasing. But we are looking at it from an LTV perspective, which is still very healthy. Our funding cost in the third quarter has improved significantly, and this has also given us a larger leeway for an LTV. And our borrowers have an LTV of above 36 months. Q, in the third quarter, we have also increased our customer acquisition efforts compared to the second quarter. This is the reason why you have seen an overall increase in sales and marketing. However, in the fourth quarter, we have begun to meet improvement in our customer acquisitions and we have seen cost decreasing by around 10%.
Jimmy
Alex, do you have any other questions?
Alex Yee
Thank you.
Jimmy Tan
Thank you.
Operator
Our next question will come from Frank John with Credit Suisse. You may now go ahead.
Jimmy Tan
Thank you. I have two questions. The first question is a follow-up question about the international market. I don't know what the relationship between the take rate and the local market is like in the international market. Because we see that its net revenue ratio has reached nearly 12%, but its long-volume or long-balance ratio is relatively low. And then, if it is in terms of net profit, what is the current ratio of the international market? The second question is about the small and medium-sized enterprises' loans. We see that this quarter still has nearly 25% of the loan transaction volume is supported by small and medium-sized enterprises. Then we understand that small and medium-sized enterprises may be more consistent with consumption and will be more sensitive to the red-light environment. I don't know what kind of trend the credit quality of these loans we see on the company platform is and whether there is a significant change in consumption mentality here. This is Frank from Credit Suisse. Thank you, management, for giving me the opportunities to ask questions. I have two questions. The first is a follow-up on the international markets. Can you provide more color on the take rate of international markets? As we see, in terms of revenue contribution, they account for around 12%, but in terms of volume, outstanding balance is still quite small. And also in terms of net profit, What is the proportion that international markets contribute? The second question is on SME owners' loans. Around 25% of loan volume is for SME owners. As we understand, SMEs tend to be more cyclical and sensitive to microenvironment. What kind of credit quality trend have we observed? Any notable difference compared to consumption loans? Thank you.
Jimmy
Thank you, Frank. Let me answer the first question. The international market, which we are talking about in Indonesia, the price and risk of its products in China are still different. Because this has a very big relationship with the local monitoring environment, its policy, and its population characteristics. From our current business, first of all, we strictly comply with the local supervision requirements. Under such circumstances, we are also constantly doing this kind of service. But no matter how this thing changes, we are at the profit angle of the whole unit, or from our take rate angle, we are still at a relatively stable level. Compared to the domestic market, the take rate overseas will be higher. From what we have seen so far, the data is around 10%. In terms of profit, the overall profit ratio is not particularly high. The main reason is that we are still in a very rapid stage of development overseas. So in the early stage, we will be able to recruit new customers relatively quickly. As you know, in the financial report, Hi Frank, this is Jimmy.
Jimmy Tan
Let me do the translation. The Indonesian market is our main focus right now and it is very different from the China market in terms of pricing, risk and the profile of the borrowers. Our product is 100% compliance with the regulators and we are also in the process of shifting to better quality borrowers. The take rate is stable and if you compare to the China market, it is much more higher at around 10%. And for the net income contribution, it is still small. The main reason is because we are still reinvesting into the international market as we are still growing that portion of our business.
Jimmy
Then the second question is about small micro-businesses. In the third quarter, we have served more than 500,000 small micro-businesses. The turnover is 1.13 billion, which is 25%. First of all, let me explain that our small micro-business customers are not a limited or particularly large group. Because our small micro-business customers are mainly from our own online consumer finance customers. Then the product we provide is about 20,000 This comparison should be said to be not big From this risk result, we think Although during the epidemic, small and medium-sized enterprises will be more affected, especially the city's lockdown will have a greater impact on small and medium-sized enterprises. However, the overall risk level is still at a very controllable level. Here, I think it still has a very big relationship with our product characteristics and the characteristics of the population. We have more than 60% of small and medium-sized enterprises that have continued to be experienced for more than three years. its overall stability and flight level is also relatively good. In the future, we will also further adjust the strategy of customers in different regions and different industries in small and medium-sized enterprises, because this has a very big relationship with the epidemic. So in the past, we mentioned that our small and medium-sized users were probably lower than the average before the epidemic. In the future, we will continue to adjust these strategies. so that we can bring the analysis level back to the level before the pandemic. Now, the overall level is similar to the previous level.
Jimmy Tan
Okay, Frank, let me do the translation. In the third quarter, we have served a total of over 500,000 small business owners and facilitated loans amount of RMB 11.3 billion, contributing to around 25% of total transaction volume. Let me just remind you that our small business owners are a natural extension of our current business and users, and they have an average ticket size of around 20,000 RMB, which is not very large and the risk is very manageable if you compare to those SME loans. And although the impact of the lockdown is more severe for businesses, I would like to note that around 60% of our small businesses have been in operations for more than three years, and their overall stability and risk performance is better. In the past, we have observed that the risk performance of our small business and the performance of our consumer loans are on a similar level. Going forward, we intend to make adjustments and strive to achieve better risk performance for our small business owners in different industries to achieve a better risk performance for them.
Jimmy
OK. Thank you, Frank.
Operator
Again, if you have a question, please press star then 1. Our next question will come from Thomas Chong with Jefferies. You may now go ahead.
Thomas Chong
谢谢管理层接受我的提问。 我是Jeffries的Thomas。 我第一个问题还是想问管理层关于海外业务的发展。 因为我们看到C, Grab, GoTo, 他们对Digit Bank或者是Fintech这个领域的话, 看到他们未来几年都会加大投入。 所以想問一下我們在印尼、菲律賓的戰略方面的話, 我們會不會跟他們有一個合作的一個關係, 或者是我們覺得這個市場很大, 還是可以站 alone來 penetrate 這個市場。 第二的話,還是想回到剛剛那個 SME 的那個問題, um thanks management for taking my questions um my first question is about the overseas business given that we have been seeing c grab and go to um investing in the fintech business and a lot of progress is making so far. So just want to ask about our Indonesia and Philippine strategies, whether we would think about cooperation with them or the market is big enough for us to go into a standalone basis. And my second question is about the domestic business. How should we think about the SME contribution in coming quarters? Thank you.
Anthony
Hey Thomas, this is Feng. Let me try to answer your first question. Yeah, I think it's a really good question. I mean overall, as Alexis has mentioned, we are very bullish about our overseas opportunities and particularly our current market in Southeast Asia. If you look around the world, there are not many countries or markets as attractive as Indonesia and the Philippines. These countries present, in our view, very good economic development opportunity and growth prospects, particularly for the consumer lending segment. When we look at them, in a way, from many aspects, it's similar to China around 2014-ish. There are tons of opportunities. We've been in those markets for several years, so I think we've established a front-runner position, a very good position in competition. And one of the things that, as you mentioned, I think that makes us feel really excited about these markets is I think the market is much more open from both regulatory, from a regulation perspective as well as from a competition perspective, which is, I mean, both of those two perspectives are very different from our domestic China market. So this bodes well for our growth potential and development opportunities. And it presents more possibilities for us to do things that are, frankly speaking, not very viable in our domestic market. So things like getting into POS financing, things like partnering with upcoming giants like GoTo, Or even things like getting into segments like digital banking. These are things that are not quite possible in domestic China, very difficult. But there are tons of opportunities. It's wide open. So I think as we continue to grow our business in these markets, we've established a very strong footprint there. I think all these things are possible, and we are very actively looking into these growth opportunities. Yeah, thanks.
Jimmy
Thomas, about the second question, it's about our small and medium-sized enterprises. In this big environment, our small and medium-sized enterprises will not be a particularly important direction. Now, the 20% ratio probably reflects the ratio of our small and medium-sized enterprises in our customer structure. 所以我们预计未来大概也是基本上是在这样的一个水平当中。 Hi, Thomas, let me do the translation.
Jimmy Tan
Based on the current environment right now, small business owners' loans will not be a main focus for our company. And going forward, we believe the current trend of around 25%, we will maintain our proportions of small business loans at similar levels.
Jimmy
Okay, Thomas, 看看还有没有其他问题吗?
Thomas Chong
Okay, thank you, Thomas. Thank you.
Operator
Is there no further questions now? I'd like to turn the call back over to the company for closing remarks.
Jimmy Tan
Thank you all for joining our third quarter earnings conference call. If you guys have any further questions, please feel free to reach out to our investor relations team offline or online. Thank you so much.
Operator
This concludes this conference call. You may now disconnect your line. Thank you.
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