Micro Connect sets ‘market standard’ for SME

Regional investment and financing firm Micro Connect has released a new set of protocols to introduce a new market standard for micro and small business financing, the firm announced this week in a statement.

Officially referred to as the Micro Connect (Macao) Financial Assets Exchange Co., Ltd Market Accept Protocol (MCEX MAP, herein as MAP), the set of protocols aims to provide a universal and convenient set of tools to guide market participants.

According to the firm, for investors, the MAP sets a standard to value of expected cash flows and their corresponding risks of every Daily Revenue Obligation (DRO) listed on MCEX. For micro and small businesses, meanwhile, it sets an optimal revenue-sharing ratio and contract period to secure funding from investors.

“Given the novel nature of this new market, Micro Connect had to establish these standards for investors in its initial stage of development,” the firm stated. “The launch of Micro Connect Leadership Fund is the first participant in the market, a business development team to originate investment opportunities among micro and small businesses, and an exchange team to build and operate MCEX.”

To further explain the new protocols, the firm used a hypothetical scenario. “For instance, MCEX has introduced a new metric called Price-to-Net Contract Payout Ratio. Similar to the commonly used Price-to-Earnings Ratio (P/E Ratio) in traditional finance, this metric helps investors evaluate the market value of a DRO based on its expected future cash flows.”

The firm added that, since the inauguration of the local investment and exchange market last August, the number of market participants has “[continued] to grow,” so that it is entering “its market operator phase of development” and will become “a disinterested operator of the market that it has set up.

“With the release of the MAP [on Tuesday], we seek to develop a vibrant ecosystem with broad participation from a diverse set of global investors, micro and small businesses, and market intermediaries,” the firm said.