SME loan securitization gains traction in Asia-Pacific - S&P

   Small and midsized enterprises (SMEs) are the engine room of many economies, including those in Asia-Pacific. SME lending, however, remains a challenging job, and securitization may offer some solutions, according to S&P Global Ratings.
  In an article today titled, "SME Loan Securitization--An Evolving Landscape In Asia-Pacific," the credit rating agency discusses the unique risks of the SME sector, the variety of related securitization tools, and some of the analytical approaches that have been used to rate this asset class globally.
  The use of securitization for financiers to support the SME sector is increasing in Asia-Pacific, particularly in Australia and China, where the respective governments are taking measures to address ongoing funding challenges for this sector. Various asset classes and securitization structures have been employed.
  In recent years, the increasing presence of financial technology (often called fintech) has opened up the SME lending landscape as financiers use predictive data analytics and their pervasive networks to capitalize on lending opportunities and risk monitoring in an under-served market. Across the region, financiers related to e-commerce giants and traditional banks have been able to expand their footprint in SME lending in a more efficient way.
  S&P believes the impetus provided by government support, the identification of more securitization approaches, and the increasing penetration of fintech will bolster the use of securitization as a funding tool for SME lending in Asia-Pacific.
  While the unique risks of this sector may warrant a more cautious approach to credit analysis and operational risk assessments, continued advances in technology and data analysis will enable a greater understanding of credit risk. This should ultimately lead to a more accurate prediction of defaults and improve access to finance for SMEs.