Oriented Sme Relationship Lending

The SMEs play an important role in economy, but they always feel difficult in getting external finance from the financial institutions. There is much research on the finance problem of SMEs. Stiglitz and Weiss (1981) gave an ingenious explanation on the credit rationing in the credit market, and their contribution explained the reason for the SMEs' finance problem. Chinese researchers have provided some solutions to the SMEs' problem, such as financing from the OTC market, guaranteed by the credit guarantee company or supported by policy. The author have noticed that the foreign SMEs always get finance by relationship banking. In this thesis, the author would propose a new solution to the issue of SMEs financing from the relationship banking's perspective, and give the answers to following questions:Why do SMEs face the finance problem?Why do foreign SMEs choose the relationship banking? How does relationship banking add value? What are the costs?What factors would influence the relationship banking?How does the relationship banking in the China? What should we do to promote the relationship banking?The analysis provides a preliminary theoretical framework, as well as some helpful advice in policymaking, which is of notable importance.Based on the reality, this thesis employs economic theory to analyze the preceding questions. First, the author analyzes the reason for the issue of SMEs financing; then the author discusses the theoretical relation between the finance of SMEs and the relationship banking; finally he comes to relationship banking in China, giving some advice on promoting relationship banking in China. SMEs: small and medium enterprisesOTC: over the counterThis thesis is composed of four chapters, and the main contents of this dissertation are as following:Chapter 1 analyzes the finance framework of SMEs, giving an explanation on the issue of SMEs financing. In Section One, the author gives a definition of SMEs, and points out that SMEs are of notable importance for an economy. The Section Two analyzes the finance framework of SMEs. The author finds out that the controllers are the main source of finance and that the bank credit is the second important finance source of SMEs. In fact, the finance problem of SMEs means the difficulty in getting bank credit, and we should find out a solution to finance problem from bank credit's perspective. In Section Three, the author gives an explanation on the finance problem of SMEs. Because of the asymmetric information, there does not exist an interest rate which could settle the credit market. In order to decrease the credit risk, the bank chooses to ration the credit applicants. SMEs are particularly vulnerable because they are often so informational opaque.Chapter 2 analyzes why SMEs rely on relationship banking, and discusses the unique value of relationship banking, and the main costs. We define relationship banking as the provision of financial services by a financial intermediary that:①invests in obtaining customer-specific information, often proprietary in nature; and ②evaluates the profitability of these investments through multiple interactions with the same customer over time and /or across products. The first section shows that the information of SMEs is often 'soft' data – such as the information about character and reliability of the firm's owner – that may be difficult to quantify, verify, and transmit through the bank organization. Only if the small firm chooses to interact with the bank over a long period of time, the bank could catch the soft information of that small firm. The bank-SME relationship decreases the asymmetric information, while increases the SMEs credit availability. The author discusses the benefits and costs of relationship banking in the second section. In nature, the relationship banking is an information-based credit technology, which helps the information interaction of both sides, and permits both sides to renegotiate the contract if there is any change in information; and it...