Study On Expanding SMEs Trade Financing By Banks

Looking at the track of world economic development, Small and Medium Enterprises (SMEs) play an important role in increasing employment, expanding import and export, promoting scientific and technological progression as well as general market prosperity, etc. SMEs is the driving force and supporting pillar of socio-economic development. As of the end of2008, the SMEs businesses take up nearly70%of import and export trade volume and a vast majority of domestic market trading. However, due to information asymmetry inadequate security guarantee mechanism,high moral hazard and strict bank credit ration, financing is still a bottleneck restricting the development of SMEs. Since trade financing plays a pivotal position in the SMEs financing, the research of bank expanding trade financing business for solving the problem of SMEs financing has important theoretical and practical significance. China’s financial market is becoming more competitive as foreign banks gains more accesses. Without continuous exploration of new services and innovation of financial products, domestic banks will inevitably fall behind in this keen competition. Only through innovation of financing species and syncretization between financing and trade can we have a faster development of economic, trade and financing. Therefore, the expansion over the SMEs trade financing business is a win-win choice for both banks and enterprises, at the same time it is also an essential practical part of the business development for the bank itself.Based on the study of SMEs trade finance issues, this article combined advanced experience of expansion of SME trade finance business from domestic and foreign banks with other aspects of the product and process innovation, provides trade finance products management model for SMEs system which accommodates China’s special conditions and practice of banking, supplied a feasible strategy for the bank to expand the SMEs trade financing business.Conclusions are:Due to the fact that the majority of our country’s market space is filled with SMEs, it is necessary for bank to greatly expand SMEs trade financing business; there is a distinct gap between domestic bank’s trade finance business and foreign banks’, We should learn from foreign advanced experience to promote our own business development; Banks should change its business philosophy, work hard to expand the SMEs market, through the integration and innovation of traditional trade products, as well as constantly evolve business financing which relies on cross-border trade in RMB clearing, introduce in-depth concept of supply chain and other financing options suitable for SMEs’financing needs and their marketing strategy, increase SMEs trade finance product innovation and marketing, while founding a professional service team, reshaping business processes, establish a rational system of risk management mechanism, improve the information technology, strengthen the inter-bank and inter-agency co-operation with third-party banks, etc., in order to build a trade finance business platform suitable for banks to expand SMEs business.