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Nov. 22 (NBD) – Local life service platform Meituan Dianping (Meituan) has received clearance from the Shenzhen Stock Exchange to issue 5 billion yuan (720.6 million U.S. dollars) of asset-backed securities (ABS). The money will be used to provide low cost loans to small businesses within its ecosystem.

The underlying assets for the planned ABS are business loans lent to merchants via Chongqing Sankuai Microfinance Co, a finance subsidiary of Meituan. 

The company said it completed the setup of the first batch of the ABS sale worth 500 million yuan (72.1 million U.S. dollars) on Wednesday.

The ABS, launched in cooperation with China International Capital Corporation, is the first such financial products offered by a life service e-commerce platform on China's stock market.

It is notoriously difficult for medium and micro businesses in China to get loans from traditional financial institutions, Internet analyst Wang Liyang told NBD, and food and beverage merchants often have to rely on personal lending when expanding business. 

To help solve the financing difficulties of small businesses, Meituan obtained a microfinance license in November 2016 and established Sankuai to provide business loans up to 500,000 yuan (72,055.5 U.S. dollars). 

The service now covers 1,556 counties, and the average loan per merchant is 80,000 yuan (11,528.9 U.S. dollars).

Meituan underwent an organizational upgrading last month, adopting a new "Food + Platform" strategy to further expand its services to businesses. The ABS sale is Meituan's attempt to tap into the growth potential within its platform, which boasted more than 300 million transacting users, 4.4 million active merchants and over 5.8 billion transactions in 2017. 

Many internet platforms are providing financial services and products, which can be embedded in various scenes to boost business growth and consumption upgrade.

Alibaba's local service platforms have partnered with Zhejiang E-Commerce Bank (MYBank) to provide financial solutions to small businesses. During the Double Eleven and upcoming Double Twelve shopping festivals, MYBank will provide 17 billion yuan (2.4 billion U.S. dollars) of loans to businesses on food delivery platform Ele.me and food and lifestyle unit Koubei, and 10 million yuan (1.4 million U.S. dollars) in subsidies to lower their funding costs, said Jin Xiaolong, vice president of MYBank. 

Compared with giants like Ant Financial and Tencent, Meituan's financial business is still in its early stage, and will face more challenges in the future. According to industry insider, risk control and customer acquisition are vital in the financial industry. Meituan needs to pay attention to risks from regulatory policies, protection of big data and system security. 

Email: limenglin@nbd.com.cn