The Study On The Folk Finance's Role In Small And Medium-Sized Business Financing

The development of Small and Medium-sized Business(SMB) has a significant effect on the continuous, healthy and steady development of our economy as well as the employment situation since our Reform and Opening-up. However, as the economy is undergoing a strategic change, some regions are over investing. Important economic resources such as energy, transportation and electricity are strained. The difficulty for enterprises to finance intensifies. Especially for SMBs it is hard to achieve equity finance. The so-called "finance disability", by far has become the main obstruction to SMBs' development in China.The government regulated financial institutions, mainly the state-owned banks largely serve large state-owned businesses, with pretty limited support for SMBs in the market. On the other hand, as Mackinnon, the famous economist, said, "Service for small-loan client provided by organized bank is unsuccessful indeed". The state-owned financial institutions can not satisfy the financial demand of SMBs. As a result, folk finance, especially unregulated folk financial institutions which respond well to market demand become an important source for SMBs.Folk finance plays a complementary role in improving the liquidity and utilization of capital, the development of local and non-state-owned economy, and complementing the inadequate service of government regulated financial institutions. However, the negative effect of folk...