The Interest Coordination Among Main Participants In Credit Guarantee

Credit guarantee was not only a way to provide credit enhancement service for SMEs, but also a way to improve the probability of loan repayment. Banks、SMEs and guarantee agencies were the main participants, among which the interest were relative. In practice, because of their own pursuit to maximize the interest, each participant’s behavior in short term might reduce long-term profitability of the credit guarantee industry.This essay analyzed the key point of interest relationship among the guarantee participants from the business model. It turned out that there existed an uneven distribution of interest among the three participants. To find out how this happened, the essay took a deep look into the relationship between bank and guarantee institution as well as guarantee institution and SMEs under the theory of adverse selection and moral hazard. Finally, described the actions and strategies of participants with game theory and formulated their behavior and interest and introduced the mechanism of rewards and punishments in the basic analysis frame of principal-agent theory to balance the interest relationship between each subject.The conclusions are as follows:firstly, there existed an uneven distribution of interest among the three participants, which was reflected in the two contracts. Secondly, the dominant position of the bank was gradually formed in the long-term bargain with guarantee institutions. The deficiency in guarantee institution’s scale and management was the important factor to promote the results. Thirdly, SMEs’adverse selection emerged when guarantee institution raised guarantee requirements. At last, the introduction of the reward and punishment mechanism helped to balance the interest conflict between the main participants and force the guarantee agencies choose SMEs with lower risk. The determination of prize and punishment intensity should comprehensively consider guarantee fee, bank’s monitoring level and accumulated reputation of guarantee agencies. The innovation of this paper was to analyze the internal credit guarantee risk from the perspective of interest conflicts in the frame of principal-agent theory. In addition to studying the cooperation between the bank and the guarantee agency, the analysis also included in the conspiracy between enterprise and guarantee agency. And found balance on the premise of benefit maximization to dissolve the internal risk solution.