Having only been in operation for under two years, Micro Connect has already managed to assist 10,000 micro and small enterprises (MSE) in China to access $460 million in funds from global capital, by leveraging fintech.
Instead of fixed interest and principal repayments or diluting the business holder's ownership of their MSE, the financial market platform introduced an approach whereby businesses repay debt through a fixed percentage of daily revenue for an agreed period, called a Daily Revenue Obligation (DRO).
Both debt and equity options for MSEs in China can be difficult, according to Micro Connect. Debts, as small businesses struggle with the collateral requirement, and equity as investors typically overlook them as the investment is small, while owners can feel the equity given up is too much.
This year Micro Connect announced its intention to expand from solely financing companies itself through the Micro Connect Leadership Fund, to the Macao Financial Assets Exchange (MCEX), an exchange that will facilitate the buying and selling of its proprietary asset class, so global investors can directly finance MSEs.
In August 2023, the firm raised $458 million in Series C funding.
"The stats speak for themselves: 10,000 MSMEs and $460 million. That is social impact on a significant scale and it is going to the smallest businesses, which themselves really need the financing to scale, and when they do, will reinvest into local and other supply chains and create jobs," commented one IMPACT Awards judge.
The growth has been rapid, having made its first investment in December 2021, Micro Connect made its hundredth in March 2022, and had hit 10,000 by August this year. It then moved out of the Hong Kong market in September with its first investment in mainland China and is looking to expand further into new regions.
The lockdowns caused by Covid, contributed to this lending model flourishing as businesses that were closed and making zero revenue during the city lockdowns were then also paying back zero of their debt under the DRO.
