Study On Sustainable Development Of Small Loan Company In China

Since2005， Shanxi Province, Guizhou Province, Sichuan Province, InnerMongolia Province and Shaanxi Province have begun to set up some small-loancompanies which were seemed as a kind of institutional innovation. With "Guidanceof the Small-loan Company" published in May2008, the small-loan companies inchina have been developing at a high speed. By31December2011, there have been4,282small-loan companies and47,088employees and331.866billion RMB ofregistered capital. During the rapid development, small loan companies have beenalso facing with many problems on their sustainable development from themselvesand the outside. The focus of this article is to identify these problems and solve them.Researching these issues has an important practical significance for the developmentof small loan companies at a healthy, sustainable and stable way. This article includesthree parts as follows:The first part is mainly about basic statement of small loan companies. Firstly,the author describes the basic meaning and characteristics of small loan companies,and believes that small-loan companies not only have special service object and riskcontrol systems, but also take every effort to achieve sustainable development.Secondly, the author tells the differences between the small loan companies andIllegal financial institutions, between the small loan companies and commercial banks,between the small loan companies and financing guarantee companies. Thirdly, theauthor analyzes the value of the small loan companies, and points that a small loan company is contributed to solve the problem of shortage of funds of small enterprises,to establish an inclusive financial system, to regulate the private loan, to have asustainable small loan and so on. Lastly, the author introduces the history of smallloan companies.The second part is mainly about the problems encountered by small loancompanies in the process of development. Firstly, the normative norms of small loancompanies have not a high legal position. Secondly, the source of funds is limited.Thirdly, because the small loan companies are not financial institutions, their taxburden is too heavy, and they cannot access bank credit system. Fourthly, theconcerned authorities set many restrictions on small loan companies, including theoperating region limit, scope of business restrictions, and upgrade restrictions. Fifthly,small loan companies are facing a number of risks, including credit risk, operationalrisk and legal risk.The third part is mainly about a number of recommendations proposed by theauthor. Firstly, the concerned authorities should optimize the legal system of the smallloan companies. Secondly, broaden financing channels, including that small loancompanies can borrow more money from the bank, the concerned authorities reducethe restrictions of shareholder identity and ownership structure, Small loan companiescan absorb some concerned public’s deposits. Thirdly, Small loan companies shouldbe as a part of financial institutions or get some subsidies from government, includingtax incentives and subsidies, get access to bank credit system, lower financing costs.Fourthly, the concerned authorities should reduce or cancel operating regional andupgrading’s restrictions, clearly define scope of business. Fifthly, small loancompanies and the concerned authorities should improve the risk control measures, tobegin with, small loan companies should establish a credit system, besides, small loancompanies should strengthen the internal risk control of small loan companies, lastbut not least, the concerned authorities should strengthen external regulation.