A Study Of Credit Enhancement On SMEs’ Collection Notes

SME financing bottleneck problem prevailing in different countries around the world, on the other hand SMEs occupy important position in the national economic production system, and is a major driving force to economic development. Due to the contribution of SMEs to the national economy but with disproportionate financial resources they can make use of, many countries will make efforts to giving policy support to SMEs, to alleviate the inefficiencies of the market and increase total social welfare.SME collective notes aiming to actively promote the development of small and medium-sized enterprises and solve their financing problems are direct financing instruments, in which the government has played a central role. Government is not only responsible for screening out qualified SMEs and play an organizing and coordinating role in the process of issuance,but also give subsidy support, preferential tax and implicit guarantee of government. The collection mainly is regional type collection and enterprises issue bills in a unified manner with assuming liabilities respectively. The enterprise issuing collection bills have a higher credit rating.As SMEs are considered to be enterprise with higher credit risk, so the use of credit enhancement technology is a key to the success of the collective notes issuing. Around the credit enhancement, the content of this article is divided into three parts:The first part will study the current situation of credit enhancement in the SME collective notes. I look over the entire collective notes prospectus and apply a combination of empirical and theoretical approach to summarize the present mode of credit enhancement which is a multi-level security system insured by third-party guarantee institutions. Then combined with the example to illustrate the combined use of guarantee, co-guarantees and counter-guarantees, I also discussed the pros and cons of them, the attempt to application of structural stratification and risk reserve fund..The second part concentrating on the study in the theory of credit enhancement, make analysis of the way to mitigate the information asymmetry and promote social welfare in the exchange and production from the perspective of economics principle. The main purpose is to clarify the nature of the credit enhancement, the effectiveness and cost of the credit enhancement. At the last I make special study of the design principles in structural stratification, and explore the value of credit enhancement with options ideaThe third part is the application of the credit enhancement principle to analyze the collective notes. I select the Zhucheng collection bills as a case to make studies about its inherent principles of credit enhancement and propose that we should use a combination of internal and external credit enhancement to make SMEs with lower credit rating can raise the needed money from the capital markets.In this paper, I put the theory of credit enhancement in the background of SME collective notes and just focus on the key link to make deeply analysis of the status quo, the direction of improvement.This is different from the study of credit enchancement in combination of assets securitization, and it also go further than just the study of the operating mechanism and the development status of the collection of notes.