Core Insights - The "Interim Measures for the Supervision and Administration of Microfinance Companies" aims to enhance the regulatory framework for the microfinance industry, emphasizing risk management and compliance [2][18] - The measures maintain the principle of small and dispersed loans, promoting inclusive finance while setting stricter operational guidelines for microfinance companies [2][18] Group 1: Impact on Asset-Backed Securities (ABS) - The new regulations raise the entry threshold for microfinance companies to issue ABS, requiring approval from provincial financial regulatory bodies and emphasizing good corporate governance and risk management [4][5] - The measures continue to enforce leverage ratios, limiting the amount of funds raised through non-standard financing methods to no more than the company's net assets from the previous year [5][4] Group 2: Business Operations and Regional Restrictions - The measures reinforce the small and dispersed loan principle, specifying that online microfinance loans for consumption and production should not exceed RMB 200,000 and RMB 10 million respectively [6][7] - The geographical expansion of microfinance companies is allowed but remains limited to inter-city operations as defined by provincial financial regulatory bodies, maintaining a regional characteristic [6][7] Group 3: Prohibition of Certain Business Practices - The measures prohibit microfinance companies from engaging in "assisted lending" and set a minimum contribution ratio for joint loans, which may impact the scale and structure of joint loan ABS issuance [9][10] - Microfinance companies must not outsource core functions such as credit assessment and risk control, ensuring that they maintain direct responsibility for these critical areas [10][9] Group 4: Strengthening Compliance and Risk Management - The measures require microfinance companies to implement a standardized asset classification system and risk reserve management, enhancing asset quality management and compliance [13][14] - A clear definition of non-performing loans is established, which will improve cash flow recovery processes and enhance the monitoring of underlying asset quality for ABS [13][14] Group 5: Expanded Business Scope - The measures allow microfinance companies to engage in commercial bill acceptance and discounting, broadening their revenue sources and providing new channels for bill transactions [16][17] - Microfinance companies are prohibited from issuing or selling wealth management products, ensuring a focus on core lending activities [17][16] Group 6: Overall Industry Development - The "Interim Measures" are expected to lead to a more competitive and regulated microfinance market, enhancing the overall development of the industry [18][19] - As a key issuer of ABS, microfinance companies are positioned to maintain a significant role in the ABS market, benefiting from improved regulatory standards and operational practices [18][19]