The Problems Of The Small And Medium Enterprises In The Private Lending

Private lending can be traced back to Western Zhou dynasty; it has nearly4000years’history. Private lending originally appeared between natural persons. But it is developing increasingly among the small-to-medium enterprises (SME) with the advancement of our open up policy. SMEs need the funding support for the operation and production because of its small-scale operations and inferior risk-aversion capabilities. However, banks and financial institutions would seldom offer the funding support to them due to the reasons mentioned above. As a result, SMEs have to focus on the field of private lending. Therefore, the development of SME-driven private lending has turned up to a booming picture. On one hand, it has not only relieved the SMEs’financial stress, but also swung the monopoly position of the formal financial institutions. In the meantime, it has enhanced the usage efficiency of the private funding. On the other hand, SME-driven private lending lacks of the corresponding regulations and legislations to be formalized. There is also none of the relevant managing institutions to regulate and supervise it. These have not only caused inconveniences for SMEs to fund privately, but also brought heaps of problems for the development of our socialism financial market. This report is the research for the relevant regulations and legislations regarding the SME-driven private lending. I hope it will provide valuable suggestions for formalizing the private lending.This report is sub-grouped as four parts:the first part is the introduction of the basic concepts. Specifically, it is the discussion of how to define the scope of SME, concepts and themes of private lending, legal features of private lending and the two disputing problems (i.e. legalizing private lending and the differences between private lending and illegal financing); the second part aims to analyze the problems from SMEs’private lending, including reasons for private lending, various ways of private lending; the third part talks about roles of private lending in developing our financial system and corresponding legal issues. These discussions are aiming to reach the conclusions that the SME-driven private lending behaviors lack of laws to regulate and specialized managing institutions to overview and supervise. The fourth part is the suggestions and recommendations for the above-mentioned series of problems after referencing some developed countries’ examples such as America, Japan and Germany. For instance, the author proposes to perfect the "SME Promotion Law", and put forward some of the writer’s own views on "lending Ordinance" drafted in November,2008by the central bank, from the legislative idea to the system design. In the system construction, with the example of the emerging small loan companies, the author proposes solutions to the existing problems relating to the development of small loan companies, and establishment of a sound system for private loan regulatory.