Facilitate Smes Access To Finance Through The Development Of Movables Finance

The small and medium-sized enterprises(SMEs) contribute more than 50% of GDP in China, on the other hand, the credit services it enjoyed are limited. Constraint in access to finance hinders the further development of SMEs.Many scholars have done a lot of research about the financial difficulties faced by SMEs. Lack of the efficient enforcement of security interest, a sound collateral management industry, and advanced movables finance methodologies are the fundamental reasons behind. Many scholars believe that development of movables finance industry is one of effective ways to overcome this constraint.In this paper, the author summarized the movables finance techniques of other financial institutions. Considering the less-developed economy in Gansu Province and lack of immovable assets by majority of SMEs, the author believes that development of movables finance which enables SMEs to use its movable assets as collateral, is one of the effective way to solve financial difficulties by SMEs.This paper analyses the suitability of movables finance to SMEs, summarized the practices of L Bank in supporting SMEs, briefed the evolution of L Bank, and illustrated the strategic position of the L Bank, i.e. focus on SMEs. The paper introduced the innovation of L Bank, i.e. to serve SMEs through Value Chain Finance. The Paper introduced three modes of movables finance through case studies, 1) using franchise and usage right as collateral; 2) “two-parties” monitoring; and 3) goods in transit. The paper illustrated the application conditions, operational procedures and risk management in values chain finance. It also summarized lessons learned by financial institutions in developing movables finance: well-designed loan structure, controlled the payment of accounts receivable, and closed loan monitoring are the key; and it shall also be supported by credit enhancement methods such as insurance. At last, by analyzing the challenges faced by L Bank in conducting movables finance, the author provides suggestions on further development of movables finance industry in China, including further reform of secured transactions legal framework, facilitate a centralized collateral registry, innovate marketing method, and improve credit methodology.This paper discussed the development of movables finance from financial institutions' perspective, and provided replicable movables financing mode which can be used by other financial institutions.