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A Study On Sustainable Development Of Commercial Credit Guarantee Institutions

Posted on:2012-05-10Degree:MasterType:Thesis
Country:ChinaCandidate:J LiuFull Text:PDF
GTID:2249330368976872Subject:Finance
Abstract/Summary:PDF Full Text Request
Credit guarantee system is a widely used financial support pattern for solving the problems that small and medium-sized enterprises faced in financing. It has been 18 years since the first credit guarantee company in China and we have set up a credit guarantee system with policy credit guarantee companies as the main body and commercial credit agents together with reciprocal credit guarantee agents acting as two wings. The policy credit guarantee companies do not run for profit and they provide quasi-public goods for the market, whereas the commercial credit guarantee companies, most established by private enterprises or individuals, run for profits and provide commitment products for the market. Due to the different market positioning, these two kinds of credit guarantee enterprises are treated differently in terms of policies. And the commercial credit guarantee companies are discriminated by banks in terms of ownership pattern. This thesis intends to find out the deep reasons that the commercial credit guarantee companies are facing and then try to find out a creative profit model to obtain the sustainable development for commercial credit guarantee companies and the whole system by analyzing their current profit model.The innovative point of this thesis is the new study perspective. Starting from the basic profit model, this project will analyze the key factors that affect the profits of commercial credit guarantee companies, namely, the guarantee fee rate, guarantee fund enlargement factor, sharing of proportion for guarantee liabilities and taxation, then find out the reasons why commercial credit guarantee companies runs under high risks with little profit. Thus further studies can be conducted to find out a new profit model which includes the improvement of external running environment, innovation of the supporting pattern for commercial credit guarantee companies, innovation of the sharing mechanism of guarantee liabilities, creating new channels for supplying follow-up capitals, creating new businesses for credit guarantee. Thus the commercial credit guarantee companies can achieve sustainable development by creating new profit model which changes the current situation that they are running under high risks with low profits.The logical structure of this thesis is as follows:Chapter 1 is the introduction of the background and significance of the theme as well as the study perspective and methodology of this thesis. The current researches about the theories of financing credit guarantee will be presented in the literature review part.In Chapter 2, the current financing situation of small and medium-sized enterprises and the development of credit guarantee agents will be illustrated. Small and medium-sized enterprises have become an important pillar for the national economy and they are playing significant roles in expanding the social output as well as enhancing the employment. However, small and medium-sized enterprises are facing financing difficulties currently. By referring the foreign experience in supporting the small and medium-sized enterprises in financing, our country has developed the credit guarantee agents to solve this world problem and to some degree, the financing difficulties for these enterprises are mitigated. This chapter will mainly focus on the status quo of credit guarantee agents in Chengdu. Chengdu has also set up a credit guarantee system with policy credit guarantee agents as main body and commercial credit guarantee agents as one important wing. In 2010, the total volume of credit guarantee by credit guarantee agents in Chengdu is more than RMB 60 billion, which made great contribution for the economy development in this area. Also in 2010, the credit guarantee industry in Chengdu witnessed the reshuffle in this field. The Chengdu Finance Office published a strict policy for capital funds supervising, that is, the entire whole capital fund should be trusted by banks. And they reissued the license for financial credit guarantee and the credit guarantee agents left after the reshuffle are powerful well-operated companies while the small credit guarantee companies are eliminated from this field.Chapter 3 and Chapter 4 are the key parts for the current study. The current profit model of commercial credit guarantee agents will be analyzed in Chapter 3. By analyzing the basic profit model, we can come to the conclusion that most of the commercial credit guarantee agents are running under high risks with low profit. Moreover, the thesis intends to find out the factors and the reasons which make these agents running under high risks with low profits. In order to find out the reasons, this thesis will focus on several key factors which influence the profits, namely, the guarantee fee rate, guarantee fund enlargement factor, sharing of proportion for guarantee liabilities and taxation. Taking the largest commercial credit guarantee agent, Huitong Commercial Credit Guarantee Company as an example, this thesis will conduct empirical research. The basic profit sources for Huitong are the credit guarantee fee and the contributed income from petty loan. The registered capital for this company is RMB 710 million and the balance of current credit guarantee capital is RMB 6 billion. The guarantee fund enlargement factor for this company is about 9 which is the highest in this industry. In 2010, Huitong gained RMB 100 million in terms of guarantee fund which is also among the top ones compared with other agents in this field. On the basis of credit guarantee business, Huitong also diversified its business items.In 2010, the petty loan item makes good achievements and it got RMB 150 million loans from China Development Bank in less than 3 months since its establishment and its annual profit rate is more than 30%. However, even a company like Huitong still runs under high risks with low profit. In the current running pattern, Huitong faces the dilemma that the follow-up capital is not enough and the channels of risk-sharing and risk-transferring are less.From the practice of western developed countries, we can see that to set up the credit guarantee system for small and medium-sized enterprises is an effective way to solve the problems that small and medium-sized companies are facing in financing. However, in China’s real practice, the credit guarantee companies are running under high risks with low profit. If we can not change our profit model, we can not make the credit guarantee industry goes into a sustainable way. In the following part of Chapter 4, the thesis will illustrate how to construct the new profit model for credit guarantee companies to achieve sustainable development from the following 5 aspects, namely, improvement of external running environment, innovation of the supporting pattern for commercial credit guarantee companies, innovation of the sharing mechanism of guarantee liabilities, creating new channels for supplying follow-up capitals, creating new businesses for credit guaranteeCreating a new profit model can not be separated from the improvement of the external environment of the entire credit guarantee system. It is widely accepted that a good credit guarantee system should be based on the enterprise credit system. However, the credit system for small and medium-sized enterprises in China is in poor condition and even in some places this field remains blank. There is not a common and shared credit system which collects, registers and evaluates the credit degree of enterprises. The credit system of enterprises should be constructed, thus the cost for information collecting of credit guarantee companies can be cut down. As for the improvement of external environment, we should eliminate the discrimination by commercial banks for commercial credit guarantee companies including the discriminations in terms of ownership, guarantee fond enlargement factor, proportion of risk liabilities and guaranty money.When it comes to the measures and degrees of innovation in fiscal support, the focus of the thesis will be on the expansion of business tax relief as well as the establishment of common risk compensation fond by the central and local government. Now, the relief of business tax can only benefit the policy credit guarantee companies and only a few commercial credit guarantee agents can have this opportunity. The key standard for business tax relief is that the company runs not for profit. All the commercial credit guarantee agents are running under the rules of market and they assume sole responsibility for its profits or losses, thus they can not run without pursuing profits. The commercial credit guarantee agents are excluded out of the list when the authority makes this policy. Commercial credit guarantee agents and policy credit guarantee companies play equal roles in financing for small and medium-sized enterprises; however, they are treated differently in terms of tax. In order to make commercial credit guarantee agents, the important part of the credit guarantee system, run healthily and achieve the sustainable development of the entire industry, we should change the unfair situation in terms of taxation. Besides the expansion of business tax relief, we should also set up the risk compensation fund by central and local government to help commercial credit guarantee agents to resist the loss of compensation. Once there is compensation loss for some credit guarantee agents, a certain amount of compensation should be made in case that the running risk compensation fund of commercial credit guarantee agents is not enough. When it comes to innovation of the guarantee liabilities sharing mechanism, this thesis points out that commercial banks should also undertake certain risks, in addition, in local level we should set up more re-guarantee agents to transfer part of the compensation risks that commercial credit guarantee are facing. The financial regulatory authority should make related policies and regulations to guide banks as well as all the credit guarantee agents to follow the principle of "share interests and risks together" to make commercial credit guarantee undertake proportional liabilities rather than entire of them. The purpose of setting up re-guarantee mechanism is to transfer the risks that mounted for them. By setting up re-guarantee agents, the risks can be transferred, the credit degree can be promoted, the credit status of capability can be improved, the business scale can be expanded and the compensation risks can also be transferred. Through this kind of leveraged effect, the guarantee fund enlargement factor of this industry can be greatly enhanced.The key points in creating new channels for supplying follow-up capitals are to attract external investment to provide more capital and support some large-scale and powerful commercial credit companies to be listed. The lack of capital compensation is an urgent problem to be solved in this industry. Compared with policy credit guarantee companies, commercial credit guarantee are facing more serious situation. Now, most commercial credit guarantee companies are running under the support of group and the substantial shareholders not only do business in credit guarantee and they also invest in real industries. Thus even the substantial shareholders have the motivation to support the follow-up capital; they are often limited by the scale and application of capital. Mostly, these substantial shareholders have faced the dilemma of lacking of capital for follow-up fund after several rounds of capital increase. After introducing external business entities and shareholding reform, the government can support a certain number of powerful commercial credit guarantee companies to finance in capital market. Commercial credit guarantee companies are authorized financial agents and they play important role in financing for small and medium-sized enterprises, increasing the social output and employment. And the products they provide are of great positive externalities, so our government should support some powerful and well-operated companies to be listed. In the capital market, more capital can be attracted to this industry and the current common problems such as the lacking of follow-up capital can be solved completely.As for the business diversification for credit guarantee companies, this thesis will focus on the idea of collective development of the credit guarantee industry. In the strategy for the future development of credit guarantee companies, the credit guarantee agents can establish a group of financial services and take the various financial service subsidiaries under this platform. Thus, the credit guarantee company can be a subsidiary of this group which only supervised by the credit guarantee industry regulatory authority. The group can also have other businesses according to financial regulations related. Thus they can diversify their business and strength the profit-earning ability as well as have more capital to guard against risks.
Keywords/Search Tags:commercial credit guarantee companies, profit model, guarantee fund enlargement factor, capital compensation, discrimination in terms of ownership, risk compensation fund, business diversification
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