JACK MA’S Ant Financial, the world’s biggest fintech firm, may have a problem.

Financing from an obscure part of the debt market that the company has relied heavily on for its key consumer lending business is drying up. It’s sold only 22.8 billion yuan (US$3.6 billion) in asset-backed securities (ABS) tied to consumer lending in the first quarter, down 74 percent from the previous three months, according to data compiled by Bloomberg and China Securitization Analytics.

China’s tech giants, led by Ant Financial, have been ramping up consumer lending to meet surging demand from cash-strapped millennials buying everything from iPhones to hairdryers on online shopping platforms.

The firms then package the lending into ABS, complex financial products that they sell on to investors. The micro-lending driving such debt sales, though, has increasingly been in the crosshairs of regulators as the industry is criticized for sometimes high interest rates and underhanded lending practices.

Ant Financial’s ABS issuance began cooling in December when authorities stepped up requirements for deleveraging. Authorities also required some lenders to consolidate securitized products on their books, instead of keeping them off their balance sheets. That could push up debt ratios at micro-lenders, making it harder to meet local restrictions on such figures.

“Ant Financial’s golden days of taking advantage of easy money from the debt market probably won’t return anytime soon,” said Yang Junmin, an analyst at Internet finance research firm Shanghai Yingxun Technology Co. in Shanghai. “The declining issuance may limit loan growth and even hurt the firm’s profits.”

Ant Financial declined to comment.

The local regulation Ant Financial must heed is in the southwestern city of Chongqing, where the two entities it uses to issue ABS are based. In general, micro-lender’s debt shouldn’t exceed approximately 230 percent of net capital.

While details on Ant Financial’s debt-to-net-capital ratio aren’t publicly available, its sales of ABS surged to a record last year, potentially pressuring debt ratios under the new accounting rules.

The company issued a record 258.8 billion yuan in consumer loan ABS last year, almost three times all similar issuance in the United States in the period, according to data compiled by Bloomberg and China Securitization Analytics. (SD-Agencies)