Study On Chinese Commercial Bank Credit Financing Problem On Small And Micro Enterprises

The importance of small and micro economy in China's overall economic systemis increasingly significant. Since1990, the annual growth of China's GDP maintainedmore than9.8%. With the rapid economic development and consolidation of thepublic sector, the non-public economy, especially small and micro enterprises havemaintained a rapid development momentum, and provided an important supportingrole in the overall economy of China development.Relative to medium-sized enterprises, small and micro enterprises have a naturaladvantage in keeping up with market demand and adjusting the operating mechanisms.They also have an irreplaceable role in ensuring full employment, and promotingtechnology innovation to overcome the rising cost of labor. Currently, China isworking to optimize the economic structure, to carry out the construction of the newurbanization, and to transit to a consumer society. With its small micro-economiccharacteristics, small and micro enterprises are playing an increasingly significant rolein China.The indisputable fact is that small and micro enterprises are very difficult tofinance, although the Chinese government and financial institutions pay moreemphasis on it. In the business course of small and micro enterprises, shortage offunds is still one of the main reasons for restricting its development. Many small andmicro business financing has been largely restricted to a narrow range of self-financing, and the pace of development and growth potential are severely constrained.Basing on the results of previous studies, this paper analyzes the reasons of smalland micro enterprises lacking the bank loan payment from an economic perspective.Through analyzing the Chinese bank market structure, this paper analyzes the impactof loans to small and micro enterprises when market concentration changes. Throughthe research of different commercial banks to small and micro enterprises, this paperexplores support efficiency of different types of commercial banks. Through theanalysis of credit experience of XX bank to small and micro enterprises, this paperexplores an effective way for commercial banks credit to small and micro enterprises.By studying this paper draw the following conclusions:First, there are a large number of small and micro enterprises in China, and theindustry is widely distributed. But there is no standardized management, and theanti-risk ability is poor. Besides, there are other problems of financial services tosmall and micro enterprises, such as low coverage, the single channel, insufficient supply and so on. In this paper, we can see the giant gap between financial servicessupply and demand of small and micro enterprises by using of theoretical analysisabout the relationship between supply and demand.Second, this paper analyze the reasons of commercial banks “credit crunch " tosmall and micro enterprises from a theoretical point of credit rationing. Adverseselection and moral hazard factors lead that commercial banks control prudent lendingto small and micro enterprises only for the factors of risk, although there are a lot ofloanable funds. There is still small percentage of enterprises being able to obtain banklending; therefore, financing difficulties in small and micro enterprises are notsurprising.Third, by using the theory of the banking market structure, we can see that theconcentration of the banking sector showed a downward trend through data analysis.With the process of the rapid decline in the concentration of the banking sector, smallmicro-enterprise loans growth rate gradually increased, in which small and microenterprises lending growth rate of joint-stock commercial bank is higher than thegrowth rate of large state-owned commercial banks.Fourth, China's small and medium commercial banks have advantages infinancing efficiency to support small and micro enterprises compared to largestate-owned banks. Firstly, the area closes ties between small banks and customers, sothe small and medium commercial banks have a better understanding of localenterprises, which can solve information asymmetry. Large banks do not have thisadvantage. Secondly, small banks have an advantage in relationship lending, and itsflat organizational structure is conducive to obtain relationship lending of small andmicro enterprises. Finally, large state-owned commercial banks lack incentives tolending to small and micro enterprises for the small scale, low fixed assets, shortageof collateral in small and micro enterprises, in other words, the lending standards inlarge state-owned commercial banks are harsher than small and medium commercialbanks.Fifth, the commercial banks play an important role in financial services of smalland micro enterprises. They are main source of supply and the key to solve theproblem of small and micro enterprises in financial services. Analysis carried out inXX bank's credit experience of small and micro enterprises, and we found that inorder to provide comprehensive financial services to more small business andgradually resolve financial gap between supply and demand, commercial banks must change management philosophy, implement differentiated market positioning, buildcapacity in strategy, management, marketing, technology and human resources,improve operational efficiency, reduce service costs, and increase supply.This article innovates mainly in the following four points:Firstly, by using credit rationing theory, we analyze the reasons of commercialbanks “credit crunch ".to small and micro enterprises. We found the risks caused bythe presence of asymmetric information, which can be divided into two types, namelyadverse selection and moral hazard. These two factors have led that commercial bankscontrol prudent lending to small and micro enterprises only for the factors of riskalthough there are a lot of loanable funds. Therefore, financing difficulties of smalland micro enterprises is not surprising.Secondly, the declined concentration in the banking sector will increase thefinancing of small and medium-banking for small and micro enterprises. Throughempirical analysis, we found that as the concentration of the banking sector declined,loans of state-owned banks and small banks to small and micro businesses showed anincreasing trend, in which, the proportion of loans in small banks to small and microenterprises grow faster than the rise of large banks, in which small and microenterprises lending growth rate of small banks is higher than the growth rate of largebanks.Thirdly, the medium and small banks have a comparative advantage relative tolarge banks to support small and micro enterprises in the credit financing. It also has ahigher efficiency. This paper used DEA method to study the influence of scale andstructure on commercial banks to small and micro enterprises credit financing. Weverify credit efficiency of the large banks and small banks by dividing them intostate-owned commercial banks and the medium and small banks.Fourthly, analysis carried out in XX bank's credit experience of small and microenterprises, and we found that in order to provide comprehensive financial services tomore small business and gradually resolve financial gap between supply and demand,commercial banks must change management philosophy, implement differentiatedmarket positioning, build capacity in strategy, management, marketing, technologyand human resources, improve operational efficiency, reduce service costs, andincrease supply.