Small-and-medium Enterprises’Financing Under Information Asymmetric

Now small-and-medium enterprises(SMEs) play an important role in economic developmentof our country,which have made great contribution in the process of increasing GDP，creatingtaxes and increasing job employment positions.So far,the proposion of total number ofsmall-and-medium enterprises(SMEs) exceeds 99% in China.It is no doubt that the SMEsproblems will always be the attention focus of our government and economists.But financingways of SMEs are very narrow,which forms bright contrast with the vigorous developmenttrend,and the bank loans are the main financing channel.Because of seriouse informationasymmetry,the loan applications are often be refused.So financing from banks is not smoothtoo,and the financing problems become the key factors in the process of SMEs’development.Information asymmetry was proposed originally in 1970s ,dealing with the study of decisionsin transactions where one party has more or better information than the other , in 2001, the NobelPrize in Economics was awarded to George Akerlof, Michael Spence, and Joseph E. Stiglitz "fortheir analyses of markets with asymmetric information. Information asymmetry which isextensively applied in economics and contract theory , explained the capital shortages problemsfor the medium-sized and small enterprises. This article has investigated the developing trends aswell as the current situation of the financial environment objectively and come to the conclusionthat the essential cause of the capital shortages is the information asymmetry. Although theoverall demand for capital is still extremely high which forced the SMEs to turn to the bank loads,the serious information asymmetry and deficiency of montages make the credit inaccessible tomost of the SMEs. Now the personal and private banking and wealth management are moreimportant to alleviate the capital shortages particularly in periods of credit squeeze; however theirregular financial institutes without the bound of formal legal have generated great risks andnegative effects.This paper proposed feasible suggestions and possible solutions in three angles according tothe financial characteristics of market participators---SMEs and private financial institution aswell as the participative leaders---the central bank and the government. This paper also identifiedthe necessity of conducting credit reference system to collect information from various sourcesand provide financial institutions credit information for a variety of uses based on the premisethat banks are the main capital access for SMEs. In view of the significance and the irregularityof the private financial market, this paper recommended rationalization proposals to reinforce thecompetitiveness and stability of the financial infrastructure and suggested some countermeasures to relieve the information asymmetry between banks and SMEs.