The consumer loan securitization market has undergone a notable shift in 2024, with foreign portfolios – those outside the United States – almost equaling domestic portfolios in total issuance volume for the first time (see Graph 1). While much of this growth has been concentrated in developed markets such as the United Kingdom, Australia, and Canada, the evolving credit landscape in emerging markets presents a timely and underexplored opportunity for structured finance participants.

Emerging markets – specifically in Central and Eastern Europe – are now demonstrating both competitive returns and improving credit performance. Jurisdictions such as Estonia and Latvia are producing portfolios with higher nominal yields and robust performance metrics, including significantly lower default rates than commonly perceived. These characteristics position them as high-potential additions to diversified consumer credit strategies, especially amid persistently high global interest rates.

In this context, Cardo AI’s platform provides institutional investors, originators, and asset managers with an integrated infrastructure to monitor, benchmark, and track the real-time performance of these portfolios across jurisdictions. The data and analytics engine capture granular credit behavior, enabling better pricing, structuring, and secondary trading decisions.

• Rising foreign issuance: As of 2024, securitization volumes from foreign consumer are virtually the same to those backed by U.S. originators, driven by investor demand for diversification and improved risk-return profiles.
• Emerging market advantage: Estonia and Latvia, in particular, exhibit default rates of 1.9% and 4.9%, respectively, on high-interest unsecured consumer loans (defined as >15% APR) with maturities over 3 years—outperforming U.S. portfolios on a risk-adjusted basis.
• Superior yields: These emerging market portfolios deliver average interest rates between 15–16%, translating to a yield premium of 200–300 bps over comparable U.S. consumer loans. This premium exists despite lower default rates, highlighting a mispricing of credit risk by global investors.

As illustrated in Figure 1, investor appetite for foreign consumer loan portfolios has grown significantly, with 2024 marking a pivotal shift: total securitization volumes from non-U.S. consumer portfolios is virtually the same to domestically originated portfolios for the first time. The majority of these foreign portfolios are sourced from jurisdictions including Europe, the United Kingdom, China, Hong Kong, New Zealand, Australia, and Canada.

Notably, the final segment of Figure 1 highlights a substantial spread differential between securitization notes backed by foreign versus U.S. consumer loans. Spreads on notes linked to foreign-originated portfolios were approximately three to four times lower than those tied to U.S.-originated consumer loans. This suggests that investors currently perceive foreign originators as presenting a more favorable risk-return profile, potentially due to stronger underwriting practices, regulatory frameworks, or macroeconomic resilience in those markets.