On The Credit Financing Strategy Of Medium-Sized And Small Enterprises

The statistics of the year2011show that China’s SMEs (Small and Medium-sized Enterprises) create85%of the country’s employment and contribute more than60%of the country’s GDP. SMEs are playing a more and more important role in China’s economy and social development. The importance of SMEs to China’s economic development can never be overemphasized while the development of SMEs has been seriously restricted by difficult and costly financing. The financing problem of SMEs is a worldwide problem. This study aims to explore the institutional invention and system establishment in the macro policy making and micro operation taking into consideration the development environment of SMEs and their financing characteristics.According to the literature review on SMEs financing problems, limited financing channels and high financing costs are the main bottlenecks. The main causes lie in inconsistent risk rating and information asymmetry. Information asymmetry will cause adverse selection and moral hazard, which will lead to serious credit rationing problems in the lending market. The special characteristics of SMEs in their primary development stage also contribute to their financing difficulty. These characteristics include small scale, low transparency of accounting information and lack of mortgage assets.ZS Bank is a typical Chinese commercial joint stock bank. Through empirical study on its SME financing operation, imperfect commercial financing system and the slow development in terms of loan audition, risk management and product innovation are found to be the main inner restricting factors of commercial banks’ SME financing operation. Immature social credit system is the macro external restricting factor for SME financing operation.A systematic solution scheme can be induced based on a case study of ZS Bank in terms of its SMEs loan business. Firstly, suggestions on the establishment and perfection of social credit system should be put forward to the government through various channels; Secondly, commercial banks should invest more in their infrastructural work such as SME database, innovate their SMEs financing modes and establish their risk management system for SMEs financing.Through empirical and normative research, a conclusion may be reached that the SMEs financing problem needs a systematic solution. Joint efforts of the government and commercial banks play a vital role in the process, the government should improve the social credit system and multi-lateral financing guarantee system and commercial banks should enhance institution innovation and product innovation. The communication and interaction between the government and commercial banks is the key to the solution of SMEs financing problems.