What do you believe is the single most important factor driving up the cost of living in Nigeria?

Mention "Asset-backed securities" (ABS) to certain finance professionals and investors, and the turmoil of the 2008 Financial Crisis immediately comes to mind. The causes of this generation's version of The Great Depression have been thoroughly documented, ranging from a low-interest rate environment to a lack of transparency in the collaterization of subprime mortgages that served as the underlying assets for trillions of dollars' worth of securities.

Since then, the US Securities and Exchange Commission (SEC) have set requirements for issuers of ABS to list all underlying assets on their websites. In various countries such as the US and Switzerland there have been blockchain-based ABS, where all underlying assets are placed on blockchains in the name of transparency.

In a project that concluded in March 2024, Dean of the SMU School of Accountancy, Professor Cheng Qiang, who is also the Lee Kong Chian Chair Professor of Accounting, looked at over 10,000 tranches in 4,000 ABS deals issued in China between January 1, 2015, and June 30, 2021. He found only 25 tranches in 14 ABS deals that were issued using blockchain technology.

The project, titled "The economic value of blockchain applications: Early evidence from asset-backed securities," found that these tranches of ABS had "an average yield spread [of] 31.4 basis points lower than other tranches," which "translates into a saving of RMB9.6 million in interest payments over the life of an average ABS deal with a principal of RMB 1,181 million." The study is published in the journal Management Science.

So why are so few issuers taking advantage of blockchain technology?

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