Small And Medium-sized Enterprise Collective Bond:Dilemma Of Cost

Financing problem of small and medium-size enterprise (SME) has been long considered by government and also by academy. SME collective bond is considered one of the ways to solve this problem, which was first carried out at2007and slowly popularized these years.The SME collective bond seems to be attractive:SMEs assemble to issue the bond so that the risk is shared and the cost is lowered. But is there free lunch for SMEs, especially when government reduces its support?This article takes a review on the development of SME collective bonds, especially on the changes of guarantees. The fact that guarantees changed from policy bank to guaranty agency showed SME collective bonds were trying to get rid of the dependency of government, though they still relied on the leading and credit-support of government. Plus, no small-sized enterprise appeared as issuer in all issued SME collective bonds, which means SME collective bond is not as friendly to SMEs as it seems.After that, this article divides the cost of SME collective bond into segments and analyzes each of them. For direct cost, this article has each part of direct cost analyzed, and works out an approximate value using data of issued SME collective bonds. For indirect cost, this article estimates the cost when SMEs try to issue collective bonds independently, also gives qualitative analysis for those can’t be calculated. The analysis above shows that although SME collective bond has mildly lower direct cost than bank loan, its considerable indirect cost makes it difficult to issue only by SMEs.This article works out two ways to help. Either being issued independently or not, these two ways offer possibility to improve the design of SME collective bond so that it could be available for more SMEs.