Theory Of Community Banks Working As An Approach To Solve The Financing Problems Of SMEs

With the development of marketing economy, small and medium-sized enterprises in China is getting more and more attention in the development of national economy. At present, small and medium-sized companies account for99%of the total number of enterprises, which play an irreplaceable role in accelerating economic development, vibrating market, increasing employment and technological innovation and etc. However, the development of small and medium-sized enterprises, especially the small enterprise faced with the financing difficulty.It is proved that one of the root reasons for small and medium-sized enterprise financing difficulties is information asymmetry which leads to financial market failure by some related theories. Small and medium-sized enterprises don’t have access to formal bank financing due to the banking system and their own reason for lacking of high-quality collateral, however, the high costs of private lending is so prohibitive for them. Therefore, small and medium-sized enterprises urgently need a service organization which can help them solve the problem of asymmetric information, and then community banks arise at the historic moment. Community banks originated from the western developed countries, and the most mature ones are in the United States. There is no standard definition of community bank until today, but most recognized one is that community bank generally refers to a small commercial bank established within the community area, and the sources and applications of the capital is done within this area, which provides service for small and medium-sized enterprises and local residents. In this sense, although there some banks with the nature of community bank exist in China market, none of them is a true community bank.This paper aims to raise such a view:for the purpose of providing service for small and medium-sized enterprises and local residents to establish community banks, which is the breakthrough point to solve the financing problem of small and medium-sized enterprise. First of all, based on the essence of community bank, the paper describes and summarizes the operating characteristics of the community bank compared with other banks and financial institutions. Second, the paper illustrates the current financing situation of small and medium-sized enterprise and analyzes the financing problems for the small and medium-sized enterprises in the bank and financial institutions, private financial market, equity trading market and the bond market. Third, based on the introduction of the nature and characteristics of community bank and other financing channels cannot solve financing problem of small and medium-sized enterprise financing, from the theory and practice aspects, this article explains the comparative advantages of community bank in solving financing problem for small medium-sized enterprises compared with other financing channels:using the model of optimal scale lending, relationship lending techniques to provide theoretical basis for community bank to help small and medium-sized enterprises to solve the financing problems. For empirical analysis using the data of1997-2012, then setting up ECM model to do impact analysis of the scale of community bank loans and non-community bank loans and financing situation of small and medium-sized enterprises, which proves the close relations between community bank and financing problem of small and medium-sized enterprise. Finally, in terms of the development of community banks in China, the paper proposes some issues that should be paid attention to.