The Development Of China's Non-governmental Finance And The Financing Of Small And Medium Enterprise

Small and Medium Enterprise plays a very important role in national economy; however, lacking of fund is still the restraining factor of its development. At the same time, the non-governmental funds are abundant and they are thirst for profits. In this way, the supply side and the demand side exist together, but the problem is that the two sides do not integrate very well. Which makes the demand could not find available funds, and the supply could not employ the funds effectively. Therefore, the purpose of this paper is to relieve the problem of financing of Small and Medium Enterprise through non-governmental finance.Small and Medium Enterprise in China shares the following features: small scale, large quantity, various pattern and poor survival condition. They have strong requirements for funds, but it is hard for them to get financing. The reasons result in the above situation come down to the following 4 aspects: 1) the reason of their own. They have many drawbacks which makes the bank is reluctant to offers loan to them in view of safety; 2) the reason of banks. Banks tends to deliver their funds to major industry. Compared with major industry, the loan to minor ones at last equal to'retail business', so banks hesitate to do this kind of business; 3) Small and Medium Enterprise lacks their own financing market; 4) the reason of the government. The government rarely formulates preferential policy towards Small and Medium Enterprise. On the other side, government will issue some preferential policies to major industry so that they could develop well.The main part of non-governmental finance and its resources have various patterns. At present, the scale of non-governmental finance is very large, and its development speed is very fast. The interest rates is flexible, but it a little higher than official rates. Non-governmental finance has played positive roles, but it also has some drawbacks. We should make the non-governmental finance exert its positive functions in offering service to Small and Medium Enterprise.In order to analyze the significant issue with realistic meaning, the paper adopts the methods of integrating theory with practice. The theories used in this paper include Ronald I. Mckinnon's theory of financial repression, Edward S.Shaw's theory of financial deepening and symbiosis theory from Yuan Chunqing.It is necessary to relieve Small and Medium Enterprise's financing problem through non-governmental finance. Firstly, the formal financial institutions could not meet the financing demands of Small and Medium Enterprise. Secondly, non-governmental finance could help Small and Medium Enterprise to receive financing. The advantages of non-governmental finance include the Information Superiority, cost advantage, guarantee advantage and interest advantage.Through vast readings, the writer found that most research agree that we should develop the non-governmental finance to relieve the difficult problem of financing of Small and Medium Enterprise. But they do not find that the development of Small and Medium Enterprise could promote the development of non-governmental finance in reverse. The two sides promote each other. This paper proposes this standpoint, which also is one of the innovations of this paper. The other innovation of this paper is it proposes relevant suggestions to promote the development of China's non-governmental finance through analyzing the non-governmental finance situation of Japan, American and Bangladesh.By the above analysis, the writer proposes the measures to relieve the difficult problem of financing of Small and Medium Enterprise through utilizing non-governmental finance in detail. 1) The government should reinforce the supervision towards non-governmental finance, and guide it correctly to help Small and Medium Enterprise to solve financing problem; 2) fostering and developing small and medium-sized financial institutions to offer help to the financing of Small and Medium Enterprise; 3) establishing and improving finance system to promote the development of non-governmental finance and Small and Medium Enterprise; and 4) perfecting our legal system. This paper points out the necessity, rationality and feasibility of offering financing service to Small and Medium Enterprise by utilizing non-governmental finance through introducing of the features and status quo of non-governmental finance and Small and Medium Enterprise. And also specific measures are proposed. However, due to the writer's limited theory and insufficient practical experience, there many exists some drawbacks. I will continue to research and perfect this paper in my future study and work. And I hope this paper could have some enlightens to the issue of solving the problem of relieving difficult problem of financing of Small and Medium Enterprise by utilizing non-governmental finance.