Alibaba affiliate Ant Financial on asset-backed securities, growth plans

“The borrowers that borrow on our platforms are our consumers, which we know perfectly,” Feagin said. “We serve them based on the needs that we look at for them in the personal services market.”

The executive added that Ant Financial may make credit decisions based on its own information about the borrowers’ “repayment capability and the needs that they have.” He said, “We tailor products correctly to those consumers and it’s all those loans that happen to be then embedded into asset-backed securities that are then simply offered in to the market.”

In September, Chinese media outlet Caixin reported that after regulators peaceful rules around China’s asset-backed securities market in 2014, more companies became productive issuers. Asset-backed securities support companies raise money for both investment and other business areas.

Caixin reported there are 779 corporate asset-backed securities listed over Chinese stock exchanges, with the largest group being structured notes backed by micro consumer loans. The greatest issuers happen to be Huabei and Jiebei, which happen to be online small-loan providers of Ant Financial, which may have a blended assets well worth $14.7 billion, relating to Caixin.

The reason why some market watchers are worried about the rise in asset-backed securities is basically because sometimes the risks linked to the underlying loans are unclear.

For example, through the global financial crisis, banking institutions sold subprime mortgage-backed securities where, because of poor lending quality, there were a higher quantity of defaults on the underlying housing loans. Therefore, the value of these securities fell and, subsequently, roiled the global economic climate.

Ant Financial’s asset-backed securities are only available in China. Feagin said that the marketplace there will continue steadily to evolve and that the business is working “closely with the regulators and marketplace participants to provide those securities.”

Meanwhile, Feagin as well said Ant Financial has set its sights about the massive Southeast Asian marketplace for future growth prospects by teaming up with neighborhood partners found in countries like Thailand, Philippines, Malaysia and soon found in Indonesia.

“When you look at this marketplace, there are over 600 million persons. [Gross domestic product] keeps growing at among the fastest rates on earth and there’s an enormous demand, frankly, for inclusive personal services,” Feagin said. He added there are a lot of people in your community that are “either unserved or underserved” by the current financial services system.

“And we’re here to serve them,” he added.

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