Study On The Operating Model Of Commercial Small-loan Companies In China

Born in 1970s, microfinance has contributed a lot in the cause of poverty alleviation all over the world, especially in those developing counties. From 2005, along with a series of related policies published and constrains relaxed, small-loan companies got a great development in many areas of China. Not only work as a supplement to the financial system, more importantly, the small-loan companies provide effective financial services to the farmers, the SMEs and the self-employed mass market.Inevitably, small-loan companies in their initial stage encountered a lot of obstacles from outside as well as problems from inside, which prevent them from sustainability, such as the continuous source of operation capital, risk management, production design and so on. Concerning on these issues, based on related literature and experiences, this article tried to carry out a comprehensive analysis, hoping to find out a proper commercial operation model of small-loan companies which can get success in China’s special financial environment.The article firstly introduced research background and related theories, then described the definition of microfinance and the characteristics of microfinance institutions both at home and abroad. Great importance had been attached to successful experiences from other developing countries. The third chapter comprehensively analyzed the general environment and operational model of China’s small-loan companies, by summarizing their traits, the article tried to explain why the small-loan companies are over-regulated and what internal problems made them less developed.To make this research more close to reality, a case study on Temasek’s SEMM model, which is now a world-wide recognized microfinance model, was introduced. Detailed description on its operation procedure and deep analysis on its main advantages of mechanism were provided. This article expected to give some valuable learning samples to the microfinance industry in China. Based on the above introduction and analysis, the final part put forward some suggestions on how to improve the developing environment as well as how to perfect the operating model of small-loan companies in China, pointing out that companies should improve their structure mainly from the aspects of properties definition, risk management and cost control. Meanwhile, the reconciliation of current regulation is also in great need. Only when the outside environment and the inside mechanism were adjusted in a proper way could the small-loan companies develop and function well in China.