Small Business ABS Issuance Surges in 2020 amidst Financial Inclusion Drive


China has seen a recent rise in the use of asset-backed securities (ABS) by micro-and-small enterprises (MSE) as a channel for raising funds.

Data from CNABS indicates that the Chinese interbank market saw the issuance of 25 MSE loan ABS during the period from 2015 to 23 September 2021, for approximately 102.669 billion yuan in funds.

2020 alone saw the issuance of nine MSE loan ABS for 62.499 billion yuan in funds, equal to more than double the issuance sum for the preceding five year period.

Since the start of 2021 China seen the issuance of four MSE loan ABS on the interbank market, for funds of 17.6 billion yuan.

Domestic analysts forecast growing issuance of MSE loan ABS in China, as part of efforts to improve financial services for small businesses and drive financial inclusion.

Pan Helin (盘和林), executive head of the Digital Economic Research Institute at the Zhongnan University of Economics and Law, said to Securities Daily said that until now growth in MSE ABS has been comparatively slow for reasons including:

  1. Investor risk concerns, due to the higher risk of the underlying assets of MSE ABS.
  2. Instability in MSE ABS issuance volumes and lack of centralisation, as well as difficulty in tracking the underlying assets of MSE’s.
  3. Loan demand amongst MSE’s is flexible, and the terms are comparatively short.

China Construction Bank (CCB) is the leading issuer of MSE loan ABS in China, and recently issued the interbank market’s first ABS backed by non-performing MSE business loans.

CCB’s lead on the market is followed by regional lenders including Tailong Commercial Bank, Bank of Ningbo, Zheshang Bank, Bank of Wenzhou, China Merchants Bank, Huaxia Bank, Shenzhen Rural Commercial Bank and Sanxia Bank.

A research report from Huaxi Securities said that smaller lenders such as municipal commercial banks and joint stock banks were more prominent in MSE loan ABS issuance because they play a greater role in providing loans to small businesses, and have amassed more knowledge and experience in the area.