The Pros And Cons Of Chinese Folk Finance And Standardized Countermeasures

With the booming economies of our country, SMEs grew up very quickly. On one hand, financing needs of SMEs have been strengthened. On the other hand, urban and rural areas are facing financing difficulties. Formal finance usually credit to cities and big enterprises with low credit risk, but the financing methods of folk finance are agreed with financing needs of SMEs. About 80% of private enterprises mainly rely on self-accumulated capital and private financing.For the strong inherent resilience and vitality of market economy, private finance has become the focus of China's financial industry in recent years. In China, private finance is very active in many developed or less developed areas. In most rural areas, the scale of private finance or financing is even larger than that of formal financial institutes. On one hand, private finance optimizes the resource allocation. On the other hand, it also reduces the pressure of bank credit by SMEs in rural areas, and it also narrows China's money supply gap. As the financial market developed, it is a necessary supplement when SMEs lack funds. In addition, the development of folk finance is benefit for improving the financial system and enhancing the sense of competition of banks, and at last lead to improving financial efficiency. However, with the development of folk finance, there are kinds of obstacles, including lack of supervision, difficult to incorporate into a unified financial system. Usury, underground banking, and other forms of illicit financing bring folk finance many bad effects of long-divorced and lead to the so-called "gray zone". It is difficult to define the concept of private finance. And the high-risk and informal financing sources of folk finance lead to a bad impression to public.Because the existence of private finance has pros and cons of dual character, treatment must not only simply strike the development of private financial pressure, but also should protect its development. Regulatory authorities should strictly control and regulate the activities of civil usury, underground banking, financing and other illegal activities. There are some other reasonable forms of Private Finance, the government should provide good environment and issue related polices to help it developed healthy and stable.