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The CITIC Securities “2014 Public Welfare Microfinance Asset-backed Special Plan of CFPA (1st Tranche)” has recently completed the prescribed filing procedures with Asset Management Association of China (AMAC), and will get listed on Shenzhen Stock Exchange (SZSE) on January 15 2015. This 3-year duration product, which is raising funds of RMB 500 million, takes the creditor’s rights of farmer microcredit issued by CFPA Microfinance Management Ltd. as underlying assets. Based on the characteristics of microcredit assets, the product adopts the circular buying structure with circular period of two years. Underlying assets are under real-time monitoring by managers through direct connection to business systems of originators.
The CFPA Special Plan is a landmark being as the first asset securitization product issued under the record-filing system. In November 2014, the ex ante administrative approval of asset securitization business was cancelled and changed into ex post record-filing as stipulated in the Administrative Provisions on Asset Securitization Business by Securities Companies and Subsidiaries of Fund Management Companies and relevant supporting rules promulgated by China Securities Regulatory Commission (CSRC). At the same time, AMAC promulgated several self-discipline rules such as management measures for record-filing, negative list of underlying assets, etc.. The above moves officially pushed the assets securitization business into a new era of record-filing. Under the guidance of information disclosure-centered practice, negative list management and emphasis on process and ex post supervision, the issuance efficiency of assets securitization will be greatly speeded up, giving more play to the innovative potentials of market players.
The CFPA Special Plan is also an important measure to carry out agricultural assets securitization pilot program. It is highlighted in the Several Opinions on Financial Service Development for Agriculture, Farmer and Rural Area (“Three Rural Issues”), which was issued by the General Office of the State Council on April 20 2014, that rural financial products and services should be innovated, efforts on financial poverty alleviation should be strengthened, and financial services for vulnerable groups like migrant workers, rural women, ethnic minorities, etc. should be tangibly improved. CFPA is committed to issuing micro loans to low-income families in the countryside, and providing services for low-end groups in poverty-stricken areas who hardly benefit from traditional financial institutions. It puts inclusive finance system into practice in marketizing and sustainable forms, and effectively controls credit risks with perfect risk management systems. Through the asset securitization arrangements this time, CFPA can effectively revitalize the stock of credit assets, reduce financing costs, and continue to serve the weak links of Three Rural Issues with extensive social capital.
Under the new business rules, the issuance of asset securitization products will no longer need administrative approvals. It greatly shortens business processes and provides more efficient channels of direct financing for financing bodies with high-quality assets like CFPA. At present, SZSE has completed the following cohesive and preparing work concerning rules and business processes according to relevant requirements of the record-filing system: firstly, SZSE amended and promulgated the Business Guidelines for Asset Securitization on November 25 2014, detailing business requirements related to products listing; secondly, SZSE specified the business processes of confirmation on products listing conditions, and made public to market players in the form of Q&A. The CFPA Special Plan is the first asset securitization product getting listed under the record-filing system, marking the smooth running of new business rules. For the next step, SZSE will continue to optimize business processes, provide more convenient and efficient ways for the innovative and scale issuance of asset securitization products, and provide financial supports for economic weak links by means of market-oriented financing.
