The Research On The Legal Risk Prevention Mechanism Of Small Loan Companies In China

On March28,2012, the state council executive meeting passed a resolution of the "Wenzhou financial comprehensive reform pilot area", and identified the12major tasks which innovatives financial system, improves financial services, strengthens the ability of preventing and defusing financial risks, and builds diversified financial system matching with the economic and social development. Visibly, burst of energy from small loan companies not only brings vatality to the rural financial market, but also opens the road of the folk financial regularization. Microfinance companies has important social significance to increase supply of rural financial market, promote the folk capital under the rule of law and improve the rural financial service level. However, such problems also appeared as blind development, market orientation deviation, greater risks in the pilot micro-credit companies. Higher financing costs and taxes make its earnings lower. Narrow financing channels, lack of talents, imperfect internal control system and poor regulations make a lot of small loan companies on the verge of bankruptcy. This has seriously affected the normal operation and sustainable development of the companies, so the risk prevention of legal systems needs to be perfect.In this article, I analyse and generalize its origin, concept, characteristics and the current situation of the development through studying the development of small loan companies. This article comprehensively expounds the current problems existing in the development of small loans company, including the lack of regulation, and the deficiency of the legal system. Further combined with the actual cases to analyse various risks micro-credit companies are facing, including market risks, credit risks, liquidity risks, operation risks and regulatory risks, while the risk type of microcredit companies and that of other financial institutions (especially the formal financial institutions) have no difference, but the causes of risk are significantly different, expecially the causes of market risk, liquidity risk and regulatory risk, which directly relates to the unique law environment of small loans companies. Market risk is mainly manifested in the interest rate risk and price risk of agricultural products. Liquidity risk is due to the only "credit"characteristic of small loans companies. Regulatory risk is due to no high hierarchy of regulatory laws and regulatory system is not perfect. As to those problems, the author put forward the corresponding risk prevention measures under the condition of small loan companies, in order to ensure small loan companies develop sustainably and healthily.