Micro Connect & HSBC sign $200m Asset-backed Loan Facility to boost MSMEs in China

By Gloria Mathias

Micro Connect, which connects global capital with micro and small businesses, has announced the signing of a syndicated asset-backed loan facility of up to $200 million, with initial credit support of $50 million from HSBC.

Following a $25million asset-backed loan facility from HSBC in December 2022, the new loan facility is a validation of Daily Revenue Obligation (DRO) as an underlying asset as Micro Connect continues to expand the DRO-based investment and financing market for micro and small businesses.

The use of asset-backed facilities will help Micro Connect develop a vibrant ecosystem with broad participation from a diverse set of professional investors, micro and small businesses, and market intermediaries.

Charles Li, Founder and Chairman of Micro Connect, said, “We are delighted to continue our collaboration with HSBC as a long-term financing partner. This new facility is crucial for expanding our business model in China and beyond, as well as helping us transform into a fully disinterested operator of MCEX. We appreciate HSBC’s confidence in Micro Connect’s commitment to delivering innovative and accessible solutions to empower the underserved sectors of the economy.”

There are over 170 million micro, small, and medium enterprises (MSMEs) and self-employed individuals in China, which together make up 60% of the nation’s GDP and 80% of job creation. Yet traditional products, including both debt and equity, are not able to meet the unique needs of micro and small businesses.

The facility, an asset-backed financing solution extended from the HSBC New Economy Fund, will enable Micro Connect to grow its revenue-sharing asset class to give businesses more sustainable and affordable access to financing. HSBC has acted as the sole structuring bank, senior tranche lender, facility, and security agent, providing a flexible and scalable financing solution to support Micro Connect’s expansions.