Research On The Risks Of China's Microfinance Asset Securitization

China has been launching asset backed securitization(ABS)for a few years.The environment of regulatory policy and financial market is immature compared with western developed country.However,the issuing scale of ABS has grown rapidly since the reform of the approval system by regulatory agencies.With the growth of diversification of ABS,it also has been developing at a deeper level.Small and micro businesses are booming in recent years in China,which has already become one of the most important parts of China's economy.Nevertheless,they are facing heavy problems of financing,due to their small scale and poor qualification.On the other hand,personal microfinance services have become a hot spot business with the coming age of internet finance in China.In this context,microfinance companies emerged.However,microfinance companies are faced with a financing dilemma that their main financing methods can only rely on a low leverage financing based on their net capital,this problem put a break on their developmentThe emerge of microfinance asset securitization,as an innovative method,perfectly solved the problem.With the off-balance-sheet financing,it helps microfinance companies breaking the limited financing scale ofthe traditional way.Microfinance assets fit the standard of the underlying assets of ABS,according to the small loans,high dispersion and the expected future cash flow,for the loan package.With a proper design of the structure,microfinance asset securitization has become one of the most popular products on the marketWith the rapid growth of the issuance scale of microfinance asset securities,some potential risks are gradually exposed.Many companies generated high leverage through issuing ABS product.The underlying assets cannot be totally removed the management risk from the issuers.Moreover,it has been raised by a close attention of the regulator.There are many problems which are currently raised worth thinking about:Whether current asset securitization model can fully guarantee the stability of the assets,whether the product manual and credit rating report provided by third party can be objectively disclosed,whether investors can effectively identify risks based on provided information.This paper mainly analyzes the development of microfinance asset securitization in China's financial environment.It studies on the classification of the risks of which involved in,and the methods of credit enhancement The paper will also study on Ali micro finance asset securities as a case study analysis,which in order to provide the corresponding reference to the development of microfinance asset securitization.