A Study On Registration System Of Pledge Receivables Finance For Small-Medium Enterprises

Under the condition of highly dependence on property guarantees from enterprises' financing, shortage of gages has become as a world-wide difficulty of SMEs'financing accompanied with lack of legal property guaranties, to develop Pledge Receivables Finance (PRF) offers SMEs a viable financing channel. On 1st,Oct.,2007,<Real Right Law of the People's Republic of China> has been enacted, which incorporates 'receivables'into property rights of pledge for the first time and clearly defines Credit Reference Center(CRC) of People's Bank of China(PBC) as the legal registration authority for Pledge Receivables. At the same time, PBC formulates and issues standardized documents such as<Measures for the Registration of Pledge Receivables> and Operating Rules for Registration of Pledge Receivables>, and has established Pledge Receivables Register & Publicity System (PRRPS) which is run based on internet.This paper, combining with the operating experiences of the Pledge Receivables Registration System (PRRS) from CRC of PBC for more than three years, based on summarizing of its operation mechanism and characteristics, it uses Information Asymmetry Theory (IAT) and Credit Management Theory (CMT) according with idea of 'to identify problems-to analyze problems-to solve problems', by means of documentation and questionnaires analysis, to propose the necessities,system design and policy suggestions on establishment and consummation of PRFRS for SMEs. First, to propose the necessity of registration system. It seems that difficulties of SMEs'financing come from lack of management experiences and weaknesses on anti-risk capabilities so that financial institutions behave with'credit crunch'; in substance, the information asymmetry causes the facts, one of which is shortage of information on enterprises for financial institutions, the other is the unknowing of credit products of financial institutions from enterprises, which leads to ineffectiveness of large amount of receivables form SMEs; inevitably, there are some risks for financial institutions during process of PRF of SMEs on aspects of legal,credit and operations, etc.. This shows clearly on both urgency and importance of study on PRFRS. Secondly, to analyze the shortage of existing registration system. The introduction of PRFRPS, based on the operation conditions that 80% of pledgees are SMEs and trading receivables with other rights of charge have taken 50% of total registered receivables, elaborates the defects and shortages of existing registration system in which registration authority formal examinations,pledgee's unilateral registration,portion of receivables facing pledge risks are included. Under condition of both legal and credit system are inadequate, asymmetry of information may easily cause moral risk and adverse selections, also credit management techniques more or less limits the consummation on the registration system. At last, to propose the register design and policy suggestions. By means of construction on social credit system,pledge receivables legislation,consummation on registration design,standardizing operations of PRFRPS, to establish information platforms and information communication channels between financial institutions and SMEs in order to create a relative information symmetry; also, to suggest government,financial institutions and enterprises to strengthen credit management and develop PRF so as to mitigate difficulties of financing for SMEs.