36036 - Ant MCC ABS

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Summary of Investment Information

Project Number

36036

Company Name

Ant MCC ABS

Date SPI Disclosed

Jul 7, 2015

Country

China

Region

East Asia and the Pacific

Projected Board Date

Aug 6, 2015

Environmental Category

FI-3 - No Impact

Status

Active

Last Updated Date

Nov 30, 2016

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Apr 24, 2017
Signed : Nov 11, 2015
Invested : Nov 17, 2015

Sector

Microfinance and Small Business - Non Commercial Banking

Project Description

The proposed investment entails IFC’s exposure of up to RMB480 million (US$77 million equivalent), in the form of Partial Credit Guarantee (“PCG”) for and/or direct purchase of a portion of the asset backed securities (“ABSs”) to be issued by a special purpose vehicle holding a portfolio of eligible micro and small loans originated by Chongqing Alibaba Microloan Co., Ltd (“Alibaba CQ MCC”, “Originator”). The total issuance size of the proposed ABSs will be up to RMB4 billion (US$655 million equivalent), with a weighted average life of up to 2 years. The proposed investment is aimed to support the Originator to expand lending to micro, small and medium sized enterprises (“MSMEs”).

Associated Advisory Engagement

No associated advisory services engagement is being contemplated at the current stage.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	75.28
Loan	0.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Guarantee	Loans to Microfinance Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

(i) Increasing Access to Finance for MSMEs: Though MSMEs play an important role in economic growth and job creation, they are under-served by traditional financial institutions. The proposed investment will enable Alibaba CQ MCC to provide up to 280,000 incremental micro loans with total amount of up to RMB8.7 billion (US$1.43 billion equivalent), and will catalyze more MCCs to access capital markets and to expand credit supply accessible and affordable to SMEs;
(ii) Promoting Development of China Microfinance Industry: The issuance of securities backed by MCCs'' lending portfolios will effectively help MCCs diversify funding source, improve funding utilization, increase asset turnover and expand lending business. It will also promote credit rating for MCC originators, improve their market recognition and incentivize them to strengthen risk management;
(iii) Catalyzing China''s ABS Market: The proposed transaction will catalyze China''s ABS market and improve the efficiency of capital markets in China, by promoting credit ratings, market-standard securitization and international structuring techniques;
(iv) Demonstration Effect: IFC''s participation in this initiative will demonstrate IFC''s confidence in microfinance industry and China''s capital markets, and IFC''s commitment to supporting the development of China''s financial sector through continuous innovation. It is expected that more MCCs will have access to the capital markets, replicating the structure of this transaction.

(i) Long Term Partnership: IFC''s support to Alibaba CQ MCC in the proposed investment will help it access to more diversified capital markets'' investors, obtain more sustainable funding, and strengthen IFC''s long term partnership with Alibaba CQ MCC and Ant Financial;
(ii) Stamp of Approval: IFC''s further innovation in China''s microfinance sector and additional engagement with Alibaba CQ MCC will increase market confidence in the sector, the Originator and Ant Financial. With its international AAA rating and proven track record in global structured finance transactions, IFC''s participation in the proposed ABS will positively influence the perception of capital market, strengthen the confidence of potential investors, and reduce execution risks;
(iii) Microfinance Industry Knowledge: IFC is a leading investor in global microfinance industry, and has proven track record as both equity investor and loan provider to MCCs in China. IFC''s participation in the proposed ABS will add value to other stakeholders in terms of in-depth understanding of the industry, asset selection and structuring, and risk mitigants for microfinance portfolios;
(iv) Financial Structuring Expertise: As a pioneer in structured transactions in emerging markets, IFC can act as credit enhancer or anchor investor, add credibility with independent due dilligence, and share expertise on financial structuring in emerging markets.

E&S Category Rationale / Risks and Mitigation

The proposed investment entails IFC’s PCG for or direct purchase of ABSs to be issued based on an asset pool of eligible micro and small loans originated by Alibaba CQ MCC, an existing IFC client involved in micro lending activities through e-commerce platforms. The project is therefore classified as an FI-3 project according to IFC Environmental and Social Review Procedure. Loans included in the asset pool shall meet the requirements of IFC FI Exclusion List. Under the existing IFC investment in Alibaba CQ MCC, it has implemented an environmental and social policy to screen its lending activities consistent with IFC Exclusion List and applicable national laws. Alibaba CQ MCC will be required to continue to implement the policy and provide annual environmental and social performance reports to IFC.

Contacts

For Inquiries About the Project, Contact

Name: Mr. Tie LING
Title: Senior Director
Telephone: 86 1862-179-0663
Address: No.18 Wantang Road, Hangzhou, Zhejiang, China

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