Legal Study On The Issue Of Informal Financing System For Small And Medium Enterprises

This article is aimed at structuring the Chinese legal system of informalfinancing for small and medium enterprises (SMEs). It is composed of three parts: thePreface, the article and the Epilogue. The article consists of five chapters in about30,000words.The preface introduces the topic selection and meaning, the available researchpapers, and the writing and the research methods of this article.Chapter1provides the basic definitions of SMEs and informal financing. Section1states the definition of SMEs, with the reference of existing definition of standard inthe papers in domestic and abroad, and combines with the existing enterpriseclassification in China. Section2compares the financing subject, financing method,financing term and financing purpose between formal financing system and informalfinancing system, and at the basis of the compared result, the section defines theconcepts of informal financing system and analyzes the derivation of the informalfinancing system. This chapter specifies the conflict of opinion for the later research.Chapter2analyzes the present situation of the informal financing system ofSMEs in Wenzhou by empirical analysis method. This chapter analyzes the marketscale, financing method and financing characteristic, combined with the historicalbackground. At the same time, this chapter states the bottleneck of the informal financing system. And it presents the defects of present system. Firstly, SMEs do notunderstand their risk ability effectively, they prefer risks. Secondly, the financingcapital flows to high risk investment industry blindly. Thirdly, there is lack ofeffective supervision measures, and the interest rate is higher than the profits ofenterprises, the enterprises can not bare the burden. Fourthly, the loan policies offormal financial institutions change frequently, and SMEs cannot make expectations.Chapter3mainly analyzes the practical significance of the informal financingsystem development in our country. The chapter firstly analyzes necessity andfeasibility of developing informal financing system in our country from a theoreticalperspective. At the same time, the chapter analyzes the present situation of laws andregulations of the informal financing system for SMEs; the chapter further analyzesthe main existing shortage: neither do we have perfect laws system support or perfectdirect financing system, nor do we have credit guarantee mechanism or supervisionsystem.Chapter4analyzes the financing system in America, England and Japan, theinformal financing system of SMEs is the main research object, the analysis canprovide policy and law suggestions for the later research. At the basis of the analysis,the paper advises: the perfect law system, the special manage organization and thesupervision system is the fundamental for establishing the informal financing systemin our country.Chapter5puts forward the legislative proposals of China regarding the informalfinancing system for SMEs. Firstly, the laws must confirm the legal status of informalfinancing system, and the special manage organization must established to support thedevelopment of SMEs. Secondly, we shall perfect the informal financing environmentfor SMEs. Thirdly, establish the supervision system for informal financing system.In the Epilogue, the aspects to be noticed and the prospects for the future of theinformal financing system for SMEs in China are summarized.