A Study To The Sustainable Development Of China’s Micro Finance Companies

Since the reform and opening up in China, Small and Medium Enterprises (SMEs) play more and more important roles in the Chinese economy. Meanwhile, the demands for capital from SMEs’increase largely. Due to constraints of the current financial system, this need cannot be easily met by formal finance. As such, a more flexible informal finance system becomes a very important supplementary channel, or a major one under some circumstances. The importance of informal finance in promoting the SMEs is not negligible, but the hidden risk caused by its nature of informality and lack of effective supervision could not be ignored.Micro finance companies made breakthrough in channeling private capital to provide loan to small businesses since 2008. They accumulated valuable experience in guiding, regulating and supervising private capital.This paper focuses on the research to the micro finance companies, examines the performance of them in guiding and regulating private lending and promoting SMEs business, and pointing out the problems and challenges for them. It also brings in an evaluation frame to micro finance companies based on their recent developments. After the assessment, by introducing relevant international experience, it raises suggestions from policy, regulatory and operational levels.The paper consists of four parts, divided into seven chapters.Part Ⅰ:Chapters 1 and 2. Chapter 1 introduces the research background, purpose and significance of this study. It reviews the recent domestic and international research on this topic and specifies methodology, content, framework and highlights of this paper. Chapter 2 is a literature review of theoretical and empirical studies of micro-credit, micro finance companies and private lending.Part Ⅱ:Chapter 3,4. Chapter 3 reviews the development, features and recent developments of micro finance companies. It also. makes comparison among micro finance companies and other similar micro finance institutions. Chapter 4 illustrates the importance of micro finance companies in guiding China’s private lending out from the gray area, and then establishes a business model to examine the effectiveness micro finance companies. It also emphasizes that the target customers for micro finance companies should be SMEs that have need for funding but do not meet by formal financial institutions.Part Ⅲ:Chapter 5,6. Chapter 5 creates an evaluation frame for sustainable developments, and it raises challenges and bottle necks for micro finance companies. Chapter 6 covers international experience in resolving similar problems that facing by China’s micro finance companies, then gives suggestions from the policy, regulatory and operational perspectivesPart Ⅳ:Chapter 7. Chapter 7 draws conclusion for this paper and states direction for future research.