Finalised ABSF investment principles
22 July 2019
The AOFM has now finalised the Guiding Principles for ABSF investment, which are published below.
The AOFM has made some revisions to the Principles following consideration of the industry comments on the draft ABSF investment principles released on 23 May. The AOFM would like to reiterate its thanks to those who contributed to this process.
Additional context for the revisions will be provided at the upcoming information sessions being convened by the ASF in Sydney and Melbourne, a transcript of which will be published on the AOFM website on Friday 26 July.
The upcoming information sessions will provide additional information and the opportunity to ask questions about the investment proposal submission and assessment process.
FINAL Guiding principles for ABSF investment
Market impact
Sustainable impact
How will the proposed investment impact the SME lender’s development path and its SME clients? Does it aim to make achievable, demonstrable and sustainable improvements to both the broader SME lending market and capital markets used to fund SME lending?
Transparency
There are likely market-development benefits from publicly highlighting ‘model’ transactions. Is the proponent willing to disclose certain aspects of the transaction that could assist development of the market and AOFM in its need to be accountable? This may include enhancing data reporting and disclosing key transaction parameters or documentation that will give potential new investors better visibility of the market.
Additionality / additivity
Related to sustainable impact, how will the proposed investment support the objective of attracting non-ABSF investment rather than crowding it out?
Competition
How would the proposed investment increase competition for SME lending generally? What would it do to the competitive landscape between the proponent and its peers?
Risk management
Institutional quality
Does the proponent possess the hallmarks of a sound and responsible institution? Is it reputable and is its operating model and business strategy aligned with the longer term objectives of the ABSF?
Lending practices
Can the proponent demonstrate good governance and how it models good practice in lending assessment, servicing and collections?
Social responsibility
How does the proponent manage ESG risks? This includes unfair contract terms, AML/CTF and reputational risk (e.g. lending to industries involved in illegal or questionable activities and the black economy).
Transaction risk profile
What is the risk profile in terms of the quality of the underlying assets, the diversification of the pool and the structure of the transaction? What are the strengths and what steps have been taken to address any risks?
Compliance
Does the proposed transaction comply with the ABSF Act, ABSF Rules and ABSF Investment Mandate Directions? Can the proponent demonstrate its ability and willingness to comply with these as well as additional, transaction-specific reporting requirements over the life of the transaction?
