A Research On Informal Finance And The SMEs' Financing

Along with the further economy reform, the non-governmental economy has been the most important motive to accelerate our country's sustainable economic growth. The small and mid-sized enterprises (SMEs) are the impetus of economic growth and will play more and more important role in the future. After a high-speed development, the non-governmental economy output decreased gradually and the most important cause is its financing plight. Shortage of funds and difficulty of financing are the main problems to restrict their development.The informal finance derived from the situation that the SMEs couldn't accept enough funds form formal financial systems refers to various kinds of investment and fund debt-credit activities not supervised by the government. According to Chinese reality, the informal finance has become an important supplement of formal finance, and played a significant role in alleviating small and medium-sized enterprises' financing problem, supporting the development of local economy, promoting financial system efficiency, perfecting local credit system, etc. However, the informal financial institutions always can't be accepted by the government, they still act in the gray district. Thus, how to regular the informal financial institutions in order to make them support the SMEs better and promote the whole economy is a valuable project.This paper has at first indicated the possibility of the funds supply and demand commutation between the SMEs'financing plight and informal finance's financing superabundance after analyzing definite conception of SMEs and informal finance. Then, there is a confluent comparability between SMEs and informal finance, that is, Informal finance could reduce remarkably the information asymmetry of SMEs and informal finance and thus solves financing plight of SMEs effectively. Afterwards, through the statistical and institutional analysis, the paper carries on a deep discussion to the positive role of informal finance in our country's economic development; it has pointed out its some negative effects existing at the same time. In the end, the paper puts forward direction of development and constitution of system about informal finance in China basing on the foreign experience. This paper implied that the government should adopt the way of"combination of block up and smooth"to regular the informal financial institution. We should take a lead to the good form and give severe stroke to the bad form. Some forms such as informal financing activities will exit consistently, some forms such as the"underground banks"will withdraw from the history gradually, and the new forms such as the private banks will appear.