The Research On The Retailing Credit Model For SME Finance

Small and Medium sized enterprises (SMEs) is the main force to promote the development of our nation's economy. It plays an important role in increasing investment, stimulating domestic demand and improving export. Especially, it makes a significant contribution to the improvement of employment. The majority of SMEs are the individual and private or township enterprises. And it is estimated that they solve more than 70% of employment in China and they account for more than 60% of the whole structure of industrial assets. However, it is difficult for SMEs to finance; most of them rely on bank credit. There is serious asymmetry between financing structure and the potential structure of economic growth. Financing problem becomes the bottleneck of development of SMEs in China. Subprime crisis had further highlighted the problem of the block of export and the shortage of funds. SMEs are facing with unprecedented challenges. Therefore, in order to help SMEs get rid of dilemma of financing, researching a set of practical solution which can give consideration to both security and profitability of bank asset, and while can private loan recourses for SMEs has become an urgent subject.This article will draw lessons from advanced experiences of other countries in exploring innovation of SMEs loan model and combine the characteristics of SMEs credit under retailing model and China's specific national conditions, and focus on the research of retail credit system for SMEs. There will be new theoretical and practical significance for domestic bank to carry out innovational new model for SMEs loan credit. This article consists of five parts. The first part brings forward the significant contribution which SMEs have made to the social economy and the financing difficulties that they are struggling from; analyze the reason from both enterprises and banks why it is hard for SMEs to get loan; and point out that the reduce of the cost of bank credit and accurate assessment of credit risk will be the breakthrough to solve the SMEs financing constraints. The second part will be focus on the analysis of the contrast of the advantages of company credit model and retailing credit model; introduce the advanced experiences of retailing credit model from other countries; and make analysis of the existed domestic small enterprise credit product and model. The third part will further analyze the advantages of carrying out credit scoring technology to solve the problems of SMEs financing and to solve the problems of reducing cost of banks and risk quantitative. And at the same time, it will introduce the successful case of Wells Fargo retailing model to confirm the hypothesis from reality. The fourth part will do the empirical analysis for the retailing credit scoring model; use principal component analysis to select financial indicators of companies and add unfinancial information and main information of enterprises; build SMEs financial credit scoring model and scoring formula through logistic regression. The fifth part will give suggestions in the three areas of Bank-Enterprise promotion, database improvement, and construction of the medium and small enterprise loan secondary market.The main conclusion of this article is that for the domestic commercial banks, especially the big banks to develop lending to SMEs, retailing credit model will make significant promotion whether in terms of reducing credit cost and improving profitability or reducing the credit risk of loan. And the new model can improve the efficiency of credit checking and reduce the cost of credit checking as well as can make it possible for SMEs to get support of credit and reduce financing cost. Naturally, carrying out SMEs under the new model is still on the primary stage and supporting policies are still not completed, and banks and enterprises are short of knowledge of the new model and even have bias for the new model. However, the great advantages and potential for improvement of the new model ought to receive enough attention from government and enterprises. It will develop a suitable SMEs retailing credit scoring model system which is in accordance with China's national conditions through continuous policy improvement and product innovation.