Chinese fintech giant Ant Financial Services Group has secured regulatory approval to issue China’s first security backed by loans to online retailers’ receivables.
Ant Financial is operator of online payments service Alipay and an affiliate of e-commerce giant Alibaba.
The offering promises to develop a new funding channel for the country’s smaller e-commerce suppliers selling via bigger e-commerce sites. Shenzhen-based consultancy Forward Business has forecast that China’s supply chain finance (SCF) sector will be worth CNY 15 trillion by 2020.
The Shanghai Stock Exchange announced that a subsidiary of Ant Financial will offer 2bn yuan (CNY) worth of asset-backed securities (ABS); equivalent to around US$317m. The bourse added that the unit is among 250 SCF operators that offer loans to online stores running businesses on Alibaba’s e-commerce platforms.
“SCF has good prospects in China because it offers necessary financing services to small businesses,” Hao Zhiwei, chief executive of Haowenhaokan, an advisory firm serving web-based companies, told the South China Morning Post. “The approval for an ABS will bolster SCF players’ confidence.”
The paper noted that the majority of ABS products in mainland China are backed by mortgage loans and car loans and the approval for Ant Financial’s ABS product may reflect Beijing’s efforts to lure big technology businesses to list on mainland Chinese stock markets. Ant Financial is believed to be seeking an initial public offering.