Study On The Major Risks Of Small-loan Companies In China

As a recent comer to the finance cycle in our country, the small-loan company model only has a history of less than five years in China. Through the process of establishing a successful business model, these companies encountered more than a few obstacles.There has been quite a lot of attention to small-loan companies from the authority and interested scholars. Issues like what the function should a small-loan company be performing or how to regulate them are arousing debates. Inevitably new things like small-loan companies have to meet many challenges. Thus, this article will be mainly focusing on the major risks of small-loan companies.For the sake of further illustration, this article firstly introduces the related definition and theories. By categorizing different studies on this subject, I try to build a background for this paper. Small-loans companies serve as loan-providers for small and medium sized companies, self-employed and farmers, all of who have the potential to be lenders.Then, I focus on the impacts from inside structure and outside environment to these small-loan companies. To specify on this issue as clearly as possible, I try to be closely connected to the reality. This article explains why small-loan companies are over-regulated, due to the cautiousness of authority, and what's more, why the current situation has prevented the small-loan companies from developing faster. If the authority manage to deregulate in a right way, combined the efforts from small-loan companies themselves, it is very possible that this industry has a better chance to grow, thus benefiting many who can't gain loans from banks. From the perspective of competition in the market, the small-loan industry has to deal with competitors like banks which recently launch small-loan-lending department and high-interest loans lenders. This article analyzes the influence of the competition. The influence of the flawed system of small-loan companies has also been explained.In the final part of this article, I tend to give some suggestions on how to improve the development of small-loan companies, which I believe it should be a joint effort from both inside and outside of these small-loan companies. Only when factors like the system and the environment are improved to suit the features of the market could the small-loan company business model significantly benefit the finance market.