Research On The Impact Of Small And Micro Enterprise Credit Business On The Profitability Of Medium And Small Banks

Since the country proposed to improve the banking system and set up new rural financial institutions in 2006,the profitability of medium and small-sized banks has become the focus of social attention.Compared with large state-owned banks,medium and small-sized banks are smaller in size and have weaker ability to resist risks.Therefore,the research on profitability of medium and small-sized banks in the process of sustainable operation has always been an important subject in the academic world.This paper makes an in-depth discussion on the factors that influence the profitability of medium and small-sized banks and finds that the credit business of small and micro enterprises is one of the important factors that influence the profitability of medium and small-sized banks.In fact,small and micro enterprises have achieved considerable development in the fertile soil of China’s characteristic socialist market economy.Take Hunan Province for example,these small and micro enterprises create more than 65%of GDP,more than 70% of its tax revenue and more than 80% of its jobs in 2019.It can be seen that the market value of small and micro enterprises is huge,and the credit business of small and micro enterprises has become one of the credit business with the greatest development potential of commercial banks.So the banks of medium and small-sized should give full play to their advantages of having a keen sense of market and flexible business changes,based on small and micro enterprise credit business,cultivate the small and micro market,improve the service quality of small and micro credit financial products to occupy the "long tail" highland of small and micro enterprises,and finally to improve their profitability,to achieve the purpose of sustainable management.Based on credit rationing theory,scale economy theory and the long tail theory,this paper uses a combination of empirical analysis and case study to investigate the relationship between small and micro enterprise credit business and profitability of medium and small-sized banks.After a systematic exposition of research literature,related theories and influence path,this paper quantifies the impact of small and micro enterprise credit business on the profitability of medium and small-sized banks in the empirical analysis part based on empirical analysis.and a panel fixed effects regression is conducted using the data of 22 medium and small-sized banks,and the empirical analysis concludes that small and micro enterprise credit business can promote the profitability of medium and small-sized banks at the 1% significance level.This paper verifies the robustness of this result by replacing the dependent variable,replacing the core independent variables and eliminating omitted variables.According to the heterogeneity analysis,the credit business of small and micro enterprises has the most obvious impact on the profitability of rural commercial banks.Therefore,this paper chooses Changsha Rural Commercial Bank,which takes the credit business of small and micro enterprises as its core business,for case analysis.Based on the data obtained from my field research and interview in Changsha Rural Commercial Bank,this paper describes the motivation of developing small and micro credit business of Changsha Rural Commercial Bank,introduces the credit product system and development status of the bank.Based on the perspective of financial analysis,this paper analyzes the impact of that credit business on the profitability of Changsha Rural Commercial Bank.Finally,from this practical case,it is concluded that the credit business of small and micro enterprises is indeed an important factor to improve the profitability of medium and small-sized banks.Finally,based on the empirical and case analysis results and reference to successful practices at home and abroad,this paper raise policy suggestions: First,we need to innovate and develop credit services for small and micro enterprises and optimize the system of small and micro financial products;second,we should strengthen the construction of risk control system for small and micro credit business and introduce insurance guarantee mechanism;third,It is necessary to improve the approval process of credit business of small and micro enterprises to improve the efficiency of credit service;fourth,we need to establish a mature incentive assessment mechanism and construct the micro and small enterprise credit ecosystem.