Study On The Micro-Credit Company’s Negative Influence On SMEs’ Financing

At present, the quantity of the SMEs is nearly50billion and they are a new force of the national economy. The SMEs employ a large population of the country and contribute2/3of the income tax of the state. They are playing a more and more important role in the national economy, especially in enriching the market and economic growth, promoting innovation, expanding employment and meeting people’s various needs. In recent years, the financial service of SMEs is continuously improving and getting remarkable achievements. However, compared with the importance of the role SMEs played in the national economy and SMEs’business needs, there are still rooms for improvement. For SMEs, the financial resource is not balanced. The financing difficulties have become the bottleneck of the SMEs’growth. It will impact both the economic growth and the social development by providing a better financial service for SMEs to support their growth. Now in the situation of monetary tightening, the folk finance became active, especially the micro-credit.Micro-credit was born in1970s in Bengal, which mainly served the poor people in village. In China, micro-credit was launched as a pilot project in2005and did business according to the rules of’No Deposit, No Cross, Consult the Rate, but limited in four times above the benchmark rate. After eight years, the micro-credit companies developed rapidly, and became an important force to help SMEs, especially small businesses, farmers and self-employed to ease the difficulties in financing.Micro-credit companies process many advantages, such as flexible operation mechanism, simple loan process, short review time, symmetric information with SMEs, temporary protection for SMEs’ capital chain from breaking. So micro-credit companies will produce some positive effects on the SMEs, which may make up for the vacancies of banks’rare lending to SMEs, helping the SMEs to financing smoothly, fast and conveniently, helping the SMEs not to go bankrupt which caused by the cash flow problem.Due to the absence of supervision and the nature of the capital, lots of micro-credit companies are pursuing the maximum of their interest through all kinds of means, including management fees, charges and so on, which results in an abnormally high credit cost. The financial credit market today is the supplier market, and SMEs are in the week side. SMEs cannot survive without the loan that they have to concede most of the profit to the micro-credit company. Besides, the micro-credit company would require the SMEs to provide high quality assets for collateral, which deteriorates the asset quality of SMEs. The funding instability is always the limitation of micro-credit company, and the low position transfer ability can easily cause the capital chain rupture. Currently, most of the SMEs are not only lack of funds, but also lack of management skills. However, the management skills of micro-credit company is also limited, thus they cannot provide any support for SMEs in reorganization and management skills improvement after financing. The evidences reveal that the micro-credit company has a negative impact of SMEs, including increasing the operational cost and influencing the SMEs’survival and development.To improve the operation of micro-credit company and reduce the negative impact on SMEs, the author provides the following recommendations for micro-credit company base on the statements above:to raise the barriers to entry of new micro-credit establishment, and reject non-professionals, because only professionals could unscramble the policies and provide a better support to SMEs; to let micro-credit company and SMEs grow together and achieve the win-win result; to strengthen the regulatory system and carry out the legal documents for micro-credit company supervision as early as possible; to strengthen the supervision departments and improve the functions of the regulatory authorities, so that the regulators can strongly regulate with direction. Micro-credit company also need self-improvement. First, the micro-credit company must comply the legal requirements and obey the rules, looking for the sustainable development way instead of blindly seek for high profits, defining "three rural" and SMEs as the target customers and provide professional service to them. Do not do unnecessary "large loans" and do not compete with medium/large-sized banks. In addition to the external supervision, the self-discipline is also a very important business philosophy for micro-credit company. It is the fundamental for micro-credit company and SMEs to grow together.