Reseach On Informal Finance Guiding Mechanism

As an important supplemental part of Chinese financial system, informal finance solved some small and medium enterprises`(SME) financing difficulties effectively. Moreover,it also plays a significant role in improving the financial structure and facilitating local economic development. But being lack of specific laws, most of informal financing activities always act with blindness and disorder. With features of concealment, spontaneity and randomness, informal finance usually happens with fraud and crime which would increase the risk of the entire financial system. The adverse events occurred in places such as Zhejiang, Ordos totally reveal informal financing`s hidden problems such as costly, high risky and so on. How to solve this problem has become an important subject to both academics and practitioners.Under this background, by using game theory, institutional economics and other theorems, this paper in-depth analysis the operation mechanism of informal financing market and the key factors which impact on participants` decision-making, to find out the effective way to guide informal financing. After that, we use empirical analysis to verify government actions` effect on informal financing market. And then we construct a new type of guiding mechanism to solve informal financing problem.The main work and conclusions of this paper are as follows: First, we examined necessity of establish informal financing guiding mechanism from theoretical and realistic aspects, pointing out that informal finance formed inevitably by financial repression policy, the formal financial institutions credit rationing and the demander`s choice. Secondly, we evaluate the domestic existing institutions and patterns. And then we build game models to study the participants` behavior to find the way of solving informal finance`s trap. Third, we use data which was collected by sending questionnaire in 24 towns of Zhongshan city where informal financing can be seen everywhere, to verify government intervention`s effect on participants` behavior. Finally, we construct a new type of guiding mechanism by learning practical experience from both home and abroad, which built on professional town industrial agglomeration characteristics and works with a government leading, market-operating mode. This proposal causes Guangdong finance office`s great interesting, and had launched in Xiaolan and Guzhen. This pattern also can be used by other places to fix informal financing problems and SME`s financing difficulty.