Meituan Cleared to Issue $722 Million of Asset-Backed Securities
Another Chinese internet company is issuing securities backed by small business loans in the face of a regulatory crackdown on online microlenders’ fundraising.
Meituan Dianping, an online food delivery-to-ticketing services platform that recently went public in Hong Kong, said Wednesday that the Shenzhen Stock Exchange cleared its plan to issue 5 billion yuan ($722 million) of asset-backed securities (ABS).
The approval came after a series of microloan-backed ABS issued by Ant Financial Services Group, an affiliate of e-commerce behemoth Alibaba Group Holding Ltd., China’s biggest online financial services provider. Meituan said it completed setting up the first batch of 500 million yuan of the planned ABS sale. The underlying assets for the ABS are business loans provided by Meituan’s microfinance subsidiary Chongqing Sankuai Microfinance Co. to the merchants on its platform.
Meituan said the funds raised through the ABS will be used to provide more low-cost loans to its merchants. Even as regulators scrutinize dodgy microloan deals, the central government has put a high priority on providing financing support to small and private enterprises.
Most ABS products in China are backed by mortgage and car loans. But now internet companies are entering the market.
Among them, Ant Financial, operator of China's biggest online payment platform, is the biggest issuer. In 2017, Ant Financial raised 293 billion yuan from ABS issuance.
But Ant Financial scaled back its ABS sales this year after online microlending came under regulatory scrutiny as regulators’ concerns mounted about the sector, which is plagued by ultra-high interest rates and improper marketing and loan-collection practices.
The average value of each of Ant Financial’s ABS applications this year has been 8 billion yuan, down from 29.3 billion yuan in 2017. The total raised so far this year, including the securities now being reviewed by regulators, has fallen to 144 billion yuan, less than half the 2017 level.
But Meituan differentiates its small loans from other consumer loans. After obtaining a license for small loans in November 2016, Meituan began to provide quick business loans to its merchants in the second half of 2017. Business owners can get smaller loans approved online immediately after providing identification and business license information. For larger loans, reviews can take half a day. The average loan amount is 80,000 yuan. Meituan said the non-performing ratio of its business loans is less than 1%.
The company can quickly assess a merchant’s operation and credibility based on its huge industry database and forecasting model, said an executive of Meituan’s business financing division.
As of the end of June, Meituan had 357 million annual active buyers and 5.1 million active merchants on its platform.
In addition to financial services, Meituan also provides online marketing, cloud enterprise resource planning and B2B goods supply-chain services to merchants. These services contribute limited revenue, and the main source of income is still commissions from the food delivery service.
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