Micro Connect unveils new market standard for financing China’s micro and small businesses
- The market-accepted protocol, or MAP, will allow investors to value the expected cash flows and risks of daily revenue obligations
- Micro Connect says MAP is a guide and will help develop an ecosystem and broader participation from a diverse set of global investors
Micro Connect, an investment platform co-founded by the former boss of Hong Kong Exchanges and Clearing, Charles Li Xiaojia, on Tuesday introduced a new market standard for financing China’s micro and small businesses.
The market-accepted protocol, or MAP, will allow investors to value expected cash flows and the corresponding risks of daily revenue obligations (DRO), a new asset class that allows contract owners to gain a fraction of a business’s revenue for a fixed period of time, in effect buying the right to future income.
DROs are traded on the Micro Connect Macau Financial Assets Exchange (MCEX), launched in March 2023 and the first licensed global exchange for DROs. The MAP is also expected to help listed businesses identify an optimal revenue-sharing ratio and contract period to secure funding.
The new metric – a price-to-net contract payout ratio – will help investors evaluate the market value of DROs based on expected future cash flows.
“I think this MAP will, in so many ways, revolutionise disclosure. We’re doing daily, we’re doing it on every single contract, on every single shop, and we’re tracking your cash flow,” said Li at a launch event in Hong Kong. “I don’t really think there’s ever going to be another disclosure system that is so granular … and so transparent.”
