The Study On Innovative Modes Of Financing By Institutions Providing Micro-Loans

With the increasingly elevated economic status of individual entrepreneursand small businesses in China, it has become more and more difficult for themto get loans. Under the current financial circumstances, it is hard forcommercial banks to change their evaluation system in a short period of time.It seems that to expand the business scale of the micro-finance companies, whichcan be supervised most easily, is the most rational and pressing issue to beresolved. However, it has become a prominent problem for those micro-financecompanies even to get enough finance for expanding their businesses. This ismainly caused by the intrinsic defect of the old finance system.To explore new finance modes, the key issue is to build trust betweenconventional commercial lending institutions and micro-finance companies. Themicro-finance companies are thought to operate to make profits only whilemicro-finance companies argue that conventional lending institutions do notgive them credits they deserve.Under the current financial system, financial security is highly valued. On thebasis of security, innovative modes of micro-finance lie in the enhancedmonitoring and supervision over the operation of micro-finance companies. Weshould integrate micro-finance companies into the current financial monitoringsystem. Meanwhile, conventional commercial lending institutions should providefurther finance to those micro-finance companies.In this thesis, author introduces the prevalent problems micro-financecompanies are facing under current situation and then analyzes the defects ofcurrent finance modes and their root causes. On this basis, author points outthe prerequisites for new modes of financing as well as the conditions to meetthose prerequisites. The research methodology employed by author is the combination of analysis andcase studies; qualitative and quantitative analyses. Specifically, author hasconducted standard surveys and made analysis of the current modes of financeby micro-finance companies. On this basis, author classifies the current modesof finance into three categories—legal; illegal and the grey areas. Observationand analysis of fiscal indicators such as rate of return on capital; overduerate; non-performing rate; reserve rate, etc. are made through fiscal indexanalysis approach in order to study fiscal changes and risk management. SWOTis employed to study internal and external factors for effective financing andto seek for new modes of rational; secure and effective financing within therealm of current financial and legal systems.This study is likely to provide a reference point for advancing financial reformand for improving financing conditions for small and medium-size companies inChina. In the conclusion part, author provides a theoretical simulation forinnovative modes of financing by micro-finance companies, which, in turns, playsa positive role in micro financing and in expanding loans for small andmedium-size companies. It creates a connection of rotated use of capital betweenmicro-finance companies and conventional lending institutions. On the technicalside, author points out the reviews and measures of improvement for the risks;scale; mechanism, etc. to be considered by micro-finance companies when theytry to participate in the huge financial market. The goal is to enablemicro-finance companies to run smoothly in financial market. In terms ofmonitoring and supervision, author presents all the applicable indicators formicro-finance companies.These indicators make the monitoring and supervision of micro-finance companiesfeasible in our financial market.The study of innovative modes of financing by micro-finance companies isconducive to the convenient and efficient financing for small and medium-sizeenterprises which will make further contributions to the promotion of employment;stabilization of economic growth and maintenance of social stability.