Build The Core Competence Of The SME Credit Guarantee Company

SME credit guarantee company is the financial intermediary specialized in providing credit guarantee for small and medium enterprises(SMEs). The rise and fall of the credit guarantee industry is critical to the rise and fall of SMEs. Due to the "High risk/ low return" characteristic of the credit guarantee business, the credit guarantee companies are initially established mainly by the government and for the purpose to develop the SMEs, for non-profit. Since 1999, the guarantee industry has been developed and eventually become matured. Due to competition and the market mechanism introduction into the guarantee industry, many guarantee companies died due to bad performance, while many others survived due to good management. The survived ones accumulated good experience and it is time to analyze their successful behaviors. Such good experience will be beneficiary to the development of whole credit guarantee industry, and therefore to the development of the whole SME industry.Regarding credit guarantee, much literature discussed it from a macro angle, such as how to ward from the guarantee risk and how to establish an effective guarantee system in certain area, etc. Until now, only little literature discussed it from the micro angle, such as how to run a credit guarantee company, or how to control the risk in a specific credit guarantee company. From 1999, the beginning of the credit guarantee industry of China, the author has been working in this industry. In 2002, the author was in charge of establishing the company of Hefei Chuangxin Credit Guarantee Co., Ltd, and worked till now. The accumulated guarantee fund in the past five years of this company is up to about 6 billion(600,000,000) RMB yuan. No guarantee failure. Until today, the success rate is 100%. Chuangxin company is highly praised by the local government and the industry. The author investigated the practice of Chuangxin company and pointed that key to develop the whole guarantee industry is to help the guarantee companies to build core competence.The core competence of the guarantee companies is built on how to control and ward the guarantee risk. The author thinks the core competence consists of the below two aspects:First, finding and nurturing the potential good companies during their infancy period. The service objective of the guarantee is the maturing good companies. After they mature, they can be funded directly from the capital market or can get loan directly from the bank, and no longer need the guarantee company. To find and provide guarantee for them in the right time and in the right fund scale is the social value of the guarantee company. And they are also the origin of the guarantee company's revenue and profit. Finding them in their initial time and establishing strong relationship with them is helpful to build trust between the two parties and to lower the guarantee risk. On the other hand, because they can received the support from the guarantee company in their initial time, they can develop faster and bring more revenue for the guarantee company.Second, the guarantee company should find a way to manage the human capital well. On one hand, the guarantee company governance structure should consider the role of human capital, for in the guarantee company, human capital leads an important role. The SMEs, the customers of the guarantee companies, compared to the big companies, are always in a process of change and development. In this process, the risk points are changing according to the business environment and time. Only the site consultant can find such risk points, and feedback and control such risk points in time. Only through establishing a good incentive and constrain mechanism for the site consultants can the risk points be controlled. On the other hand, the guarantee company should consider establishing a deep smart transferring system to ensure the human capital value-addition.In the last part, the author discusses the prospect of the guarantee industry and points out that with the boom of the SMEs and China's policy to encourage establishing new ventures, guarantee companies will have a good opportunity to develop. So, the investigation of the establishment of the core competence of the guarantee company will have a deep and far-reaching strategic sense.