Moody’s: Development of Domestic Securitization Markets Help Financial Inclusion in India and China

Moody’s Investor Service recently released a report on securitization in India and China entitled, "Securitization - India and China: Securitization Funds NFBC’s Lending to Promote Spread of Financial Inclusion."

As the report states,

[N]on-bank finance companies (“NBFCs”) are key providers of credit to individuals and small businesses that would otherwise have limited access to bank loans or would incur high interest costs for such loans. While there are various funding avenues open to NBFCs in India and China, securitization has proven to be reliable and competitively priced and is therefore an important source of the funds the NBFCs use for lending.

The report also highlights the key difference in the dynamics of how the markets in both countries are evolving. India has regulatory requirements in place that support the uptake of securitization transactions issued by NBFCs whereas such regulatory requirements on the investor-side are absent in China.

“Without such important support from institutional investors, the applicability of securitization in achieving the goal of financial inclusion has not been as widely used in China as in India,” Moody’s states.

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