Research On Financing Problems And Solutions About Small And Micro Enterprises In China

Small and micro enterprises play an important role that cannot be ignored in China’s national economy, but for a long time, especially since the economic restructuring in recent years, failures of small business due to the rupture of capital chain happen from time to time. Consequently how to solve their financing difficulties effectively and promote the healthy and sustainable development of micro-enterprises becomes a major area of current financial proposition.Based on this, the Paper first defines the concept of small and micro enterprise, introduces enterprise financing theories and literature review; secondly, economics and game theory analysis is employed, and the same as experience reference, to integrate the status of Small and micro enterprises’s financing and that of commercial banks’loans. Accordingly, solutions from policy support system and commercial banks are discussed to ease small micro-enterprise financing difficulty. Researchers at home and abroad mostly focus on just one aspect of the following three perspectives:small micro-enterprises’financing features, reasons analysis or problem countermeasures and their findings are relatively dispersed, this paper employs a comprehensive perspective from both theory analysis and experience reference, which may contribute to the field research about small and micro enterprises both theoretically and practically to some extent.The main conclusions of the paper are as follows:(1) overview of the status and mechanisms analysis. China’s financial service system of small and micro businesses is constitute of formal financial institutions and informal financial institutions, and banking industry lead the formal financial institutions in the supply of funds, but the present financial services still does not meet the funding requirements of small and micro enterprise which is characterized as short, small, lack and specialism, i.e. there is structural contradiction in financing relationship between banks and small and micro enterprises. Specifically, the small and micro enterprises face a great financing gap, low financial transparency, low guarantees and high financing costs, and on the other hand, banks prefer to borrow loan to big clients but not to small and micro enterprises for the reasons of information asymmetry and economies of scale. Game analysis shows that proper policy support system and banks’ strong control of information can help avoid the prisoners’ dilemma, i.e., (small and micro enterprises do not pay off loans, banks do not lend), and relieve the financing difficulty of small and micro enterprise. (2) Experiences and enlightenment:by comparing and antibody, the developed districts’s finance environment is improved mostly from aspects of the laws and regulations, financial services, market mechanisms, informal financial and multidimensional integrated policy optimization. (3) Counter-measures from the perspective of both government and commercial banks. On the one hand, government should improve the credit guarantees system and levy letter system, provide vigorous support on small financial institutions, reasonably guide and define the non-formal financial institutions. On the other hand, commercial banks should spare their efforts to develop innovation in credit products specially for small and micro enterprises, and reform their credit management approach, and finally improve the Customer Manager system, thus to improve the competitiveness and service capacity themselves in products, and process and talent training effectively.