Credit Rationing And Relationship Lending

There may be two outcomes when SMEs get loans from banks: first, they are unable to get enough loans under the current interest rate; second, even if SMEs could afford higher interest rate, banks are also reluctant to lend to them. The credit dilemma SMEs faced is so called"credit rationing". If we want to investigate the cause of this credit dilemma, we should have to understand the mechanism of credit rationing. The explanation of the mechanism of credit rationing is based on the theory of asymmetric information and contract enforcement. Asymmetric information will lead to adverse selection and moral hazard, yet the banks in order to maximum their profit, they will consider the"rationing"policy. The SMEs'information is relatively opaque and their mortgage scales are relatively small in compare with the large companies. The birth defects of SMES will lead them to be main targets of the banks'credit rationing. In order to alleviate this situation, the writer believes that the technique of relationship lending may be the best choice. Relationship lending has the unique method in generating information, the"tacit knowledge"generated by this method will make up the birth defects of SMEs and will have positive influence on the availability of the loans and the cost of loans.Under the universal banking system of Germany, the main channel of exterior finance of SMEs is bank loans, but the systematic credit rationing is not exists. After studying a number of the house banks of SMEs and the age of relationship between...