On Informal Finance And Small And Medium Enterprises Financing

The conclusion can be drawn both from the theory and reality that in recent years, under the conditions that the government has been conducting strict financial control towards private economy, informal finance has become the major financing resource of local small and mid-sized enterprises (SMEs) and core power to promote the development of private economy.The paper makes systemic research on the importance of informal financing towards SMEs currently and the reason, from the delimitation of informal financing. It also states the major informal financing forms currently in China. Based on the above mentioned conclusions, the paper also analyzed the advantages and disadvantages of informal financing and points out the functions of informal financing towards the financing of local SMEs.In the final part of this paper, the policy suggestions the paper gives is that the government should develop community banks largely or small and mid-sized stockholding commercial banks in China, carry out legislation and standardization towards some informal financing without dangers to the society, and at the same time set up the direct financing system for the SMEs.