Research Of The Insurance Mechanism Introduced In The Smes’ Financing Process

SMEs (small and medium-sized enterprises) play an important role in our national economy, and is becoming increasingly brilliant in the course of China’s economic development. However, the development of SMEs is not so easy. Restricted by financial problem, a large number of SMEs have closed down. Therefore, the financial problems of SMEs increasingly become the concern of the government.There are many SME’s financing channels, but regardless of the wishes from their own or from a practical standpoint, the bank loan financing for SMEs is more popular. In fact, the situation is not as optimistic as expected, and the possibility for SMEs to obtain loans from banks is not high. Considering the risk of bank loans and other thinking, the process of financing by SMEs is quite demanding. A large number of SMEs, with promising prospective and high return, but without guaranty, are not accessible to bank loans.From the nature of the problem of SME loans, the reason why bank loan is so demanding is that the credit risk of SMEs is too high. This paper argues that the main reasons for the high risk of the SME credit are information asymmetry and long-term expectations instability. For their own interests, bank will make SMEs market credit rationing, which is embodied by collateral required in the process of loaning. But we all know that a large number of small and medium enterprises can not provide collateral. Thus, the two party system and banks can not give a good solution for SMEs’financing issues. Therefore, we believe that it is imperative to introduce an appropriate third party and even fourth party, to reduce credit risk and the degree of information asymmetry in SME financing process, so as to solve the shortcomings in the bank credit rationing, and gradually realize a general balance of the overall market.Our security agencies are third party credit markets initially introduced. After years of development and practice, security agencies have shown many shortcomings, and it can no longer fully assume the role of SMEs gospel. Especially when the security agencies provide security, they also requires SMEs to provide guaranty. So for a large number of SMEs who lack collateral, security agencies can not fundamentally solve the problems of all. Therefore, under the support of the government and relevant departments, insurance mechanism, a new third-party mechanism to solve the shortage of SME loan guarantee problem, is introduced into the credit market.Insurance mechanisms play an important role in the financing of SMEs, and there are mainly three roles as follow. First, the insurance company has a relatively mature technology to identify risks, so as to reduce the information asymmetry between banks and SMEs, thus effectively reduce the cost paid by bank; Second, the insurance company has a sophisticated risk management system, which can effectively spread and transfer risk of the loan; Third, it can really solve the problem of insufficient collateral. Therefore, the insurance mechanism has an inestimable locomotive role in the long-tern development of our country’s SMEs.