Institutional Transition Sme Financing

Since 1950', various countries have attached importance to the development of small and medium enterprises because they play an unsubstantiated role at economic growth, science and technology progress, expanding the international trade and reducing the unemployment. After the reform and opening in our country, small and medium enterprises also play an important role at economic growth, reducing unemployment and technology progress. Especially from 1990', 76.6% of newly increasing industry production and 40% of revenue come from small and medium enterprises, 75% of the urban employees work at small and medium enterprises. Small and medium enterprises have been an important and active part in our national economic, so the government and economists have attached more importance to them and supported the development of them.Compared with large enterprises, small and medium enterprises are in inferior position in many aspects especially in financing. Financing is crucial to the development of enterprises and there are many financing methods and channels that can be chosen by enterprises. Because of the characteristic of financing demand of small and medium enterprises, internal direct financing channel and external indirect financing channel are the primary financing channels to small and medium enterprises. It is difficult to solve the difficulty of small and medium enterprises financing through the internal direct financing channel owing to the low strength of small and medium enterprises ,heavy tax and low depreciation ratio.Since 1949,indirect financing system has played the dominating role in our financing system ,so it is very important to the development of small and medium enterprises. Consummate of indirect financing system and innovation of the financing instrument will be of significance for the solution of small and medium enterprises financing. Attributing to the information asymmetry and high transaction cost, small and medium enterprises always encounter the credit rationing of banks. To solve these problems, the small and medium banks should be extended because of their superiority at solving information asymmetry and high transaction cost. Four stated-owed commercial banks should serve small and medium enterprises enterprises on their own initiative. The small and medium enterprises administrative financial institution will also help the solution of small and medium enterprises financing. The financing methods and instruments, which fitted with the demand of small and medium enterprises financing, should be originated. In addition, following the developed countries and areas, the credit guarantee system will be the supportive system to the small and medium enterprises indirect financing system. Credit guarantee system will become the social credit center that collects credit register, credit evaluation and credit guarantee, so it will help the solution of small and medium enterprises financing.Although small and medium enterprises depend more on indirect financing, it doesn't mean direct financing is unimportant to small and medium enterprises. Direct financing plays an important role at the original and scale-up period of small and medium enterprises and it is also important to the high-tech small and medium enterprises. Through opening the stock and bond financing channels, standardizing the local security exchange markets and developing the venture capital aiming at high-tech small and medium enterprises will help the small and medium enterprises financing. Whether indirect financing or direct financing they both belong to the informal financing system. Because of the characteristic of the demand of small and medium enterprises financing and system defects of our financing system, informal financing system will be an important part of the financing system. So we should clarify theoretically the understanding of the informal financing system. With reference to the United States, we should analyze exactly the development, the inevitability that small and medium ente...