Small Joint-stock Commercial Bank Lending to Small Business Risk Analysis

Small Joint-stock Commercial Bank Lending to Small Business Risk Analysis WANG Shuying, YAN Chao School of Management, Zhengzhou University, P.R.China, 450001 yanmaohou@yahoo.com.cn Abstract: in China banking full open today, more and more intense market competition, with financial symbiosis theory, "McMillan defect" phenomenon and bank scale economy theory as the theoretical basis, the analysis of small and medium-sized enterprises from the big bank credit financing difficulties, and how to exert joint-stock commercial bank loans to small and medium-sized enterprises, and combined with actual situation in China and foreign successful experience, and actively explore and joint-stock commercial bank financing smes in the process of the risks, and measures. Thus gradually shift joint-stock commercial bank financing for small and medium-sized enterprises, and fully utilize the prejudice joint-stock commercial bank of existing social credit system, through the flexible credit mode, enhancing the ability to resist the risk of small and medium-sized enterprises in China, and maintain social and economic stability. Keywords: Joint-stock commercial bank, Small and medium-sized enterprises, Loans, Risk 1 Current Situation of SMEs in China Small and medium-sized enterprise development and the rise of China's economic rise in recent years is the landmark of the meaning. According to the national bureau of statistics, etc in 2009, according to the new standard of small and medium-sized enterprises in small and medium enterprises, the total amount of the 99% of the enterprise, Small and medium-sized enterprises create the final products and services of value to 50% of GDP, Small and medium-sized enterprises to provide the products, technology and service of export, accounts for about 60% of the total export, In addition, the small and medium-sized enterprises also provides about 75% of urban jobs. Due to its inherent characteristics of small and medium-sized enterprises, and the degree of information asymmetry is higher than average enterprise with its bank, Bank of its financing problems in the hold more cautious attitude often becomes fund shortage, and the development of small and medium-sized enterprises in China. 2 Status of SME Financing and Development Joint-stock Banks Due to the small and medium-sized enterprises in small scale, management risk is big, the financial system is not perfect, such problems as collateral, increase the enterprise financing difficulty, namely " McMillan defect" phenomenon. Money supply, from the current society is in system and structure of dual transformation period, the financial system is more, as in reforming state-owned bank financing function, the process, and the loan risk bigger, from the actual situation, the loan risk analysis is mainly in the business bank management process, because of prior unpredictable uncertainties, the bank credit funds and normal turnover calchas withdraw funds appears, and loss of bad debt glazed, a possibility. For example, bank loans to companies, due to market supply and demand, price adjustment and reform, make loans and normal calchas return cycle, overdue loans, occupy misappropriate loans, credit capital is recovered and loss. All this is caused by the comprehensive consequences, the sme financing becomes the focus in recent years all social hot and difficult problem. With the reform of state-owned commercial Banks, operate independently, in their own profits and losses, and self development condition, the condition of the bank for loan will be more and more demanding, small and medium-sized enterprises want from four state-owned commercial bank loans will also be made more difficult and four state-owned commercial Banks tend to to large state-owned 421

enterprises or national infrastructure financing, Small and medium-sized joint-stock commercial bank, though for large enterprise financial difficulties, but the existing financing, in order to avoid the risk in bank financing smes treat it cautious attitude. Different countries and different stages of economic development in different industries, to define the same standard, and with the development of economy and the dynamic change. Countries from two aspects of the quality and quantity of small and medium-sized enterprises are defined, qualitative indexes including the organizational forms and financing ways and industry status, mainly including indicator of paid-in capital, the number of employees, total assets. In China, according to the ninth National People's Congress standing committee in the 28th meeting on June 29, 2002, of the People's Republic of China by the spirit of the promotion of small and medium-sized enterprises, the state economic and trade commission and the state development planning commission, the ministry of finance and the state statistics bureau in February 19, 2003, the interim regulations issued by small and medium-sized enterprise standard circular (economic and trade sme (2003) : 143, the main industries of small and medium-sized enterprises, which make the specific standard definition. This standard is the enterprise according to the number of staff and workers, sales, total assets, combining the characteristics of industry etc. Pursuant to the notice of the small and medium-sized enterprises of different industries should be recognized in accordance with the criteria: Standards for Defining SMEs Classification Worker Sales Total assets Industrial fields 2000 300 million the 400 million the SMEs 300 or more More than 30 More than 40 million million Retail industry 500 150 million the More than 10 million wholesales 200 300 million the More than 30 million Accommodation and 150 million the 800 restaurants construction business 300 million the 400 million the 3000 Transportation industry 3000 300 million the 2.1 Henan situation of the financing For small and medium-sized enterprise development, facing many constraints, especially in financing issues facing difficulties are bigger, these are directly restricts the development of small and medium-sized enterprises, affect China's economy. In henan province as an example, the small and medium-sized enterprises in henan province, according to the census service enterprise reflects 94.1% loans are still restrict the development of main problems, 55% of small and medium-sized enterprises due to insufficient funds flowing to reach the design production capacity, 92% of the small and medium-sized enterprises due to lack of money to expand the scale of production or technical renovation, the interest of small and medium-sized enterprises mainly rely on folk financing source of funds and private capital. While provinces of small and medium-sized enterprises, service of small and medium-sized enterprises obtain loans support its contributions not congruent with: 2007 compared in small and medium-sized enterprises, the total number of enterprises of the above 99%, realize the value of GDP, small and medium-sized enterprises above designated size 59% of the profits of 69.3 percent. According to the investigation and statistics, financial institutions, credit of small and medium-sized enterprises accounted for only the small and medium-sized enterprises and individual industrial and 422

commercial households 0.26% total. So the development of small and medium-sized enterprises in financial services, is the commercial Banks should implement strategic choice. China banking regulatory commission chairman mingkang has made it clear that currently exist large Banks operate in the home ", "the loan risk is relatively concentrated, the urgent need to guard against credit loan structure optimization, risk, Bank lending in the small business is to adjust the structure of banking assets, the rational choice of bank risk. In China, the sme financing problems is always a problem for Banks, because of this, the financing smes has become a bottleneck growth. Therefore, we see in small and medium-sized enterprise credit risk of existence, more should spend part of energy to do change old ideas and create new system, perfect the new policy, high credibility system construction of market economy environment. According to the state council development research center of the small and medium-sized enterprises in China, according to the survey, the financing of small and medium-sized enterprises widespread, the enterprise will 66.9% fund shortage is listed as the main problems of enterprise development. Sme financing difficulties mainly in the aspects: one is the financing channel is narrow, the current development of small and medium-sized enterprises mainly rely on their own internal financing, medium and small-sized enterprises problems restricting its access to external finance support, Second is the bank loans, are mainly provide bank liquidity and fixed assets, but seldom provides long-term capital credit, the existing financial institutions to support the development of small and medium-sized enterprises lack system. Three is the lack of resources, and long-term stability of financial institutions to develop a stagnant stock financing smes to reduce the chance. 2.2 Direction of joint-stock banks Facing the financing difficulties of small and medium-sized enterprises, and I think as the joint-stock Banks should improve their ideas and innovations, USES the existing social credit system, flexible in small and medium-sized enterprise credit model, provides a powerful on loan. First, as the joint-stock Banks should improve credit approval process, change the previous idea and the error of the medium-sized and small enterprises discrimination, credit approval to more mature and scientific concept, to establish a set of suitable for small and medium-sized enterprise characteristics of risk evaluation mechanism. No longer with enterprise's capital scale, sales and earnings as the only standard to measure the small and medium-sized enterprises, and decided to loan financing capability of judgment, but should not from the enterprise growth capacity, industry, product characteristic, the future business ideas, long-term planning, etc, the overall evaluation of comprehensive consideration of the small and medium-sized enterprises to risk ability, as a yardstick, such ability in examining and approving the sme financing, more scientific and objective of the loans to small and medium enterprises to assess the risk. As the author of zhengzhou branch of Industrial Bank, visit and understanding, the dynamic socgen inline bank in July 2005, held a small and medium-sized enterprise financial services to develop, small and medium-sized enterprises of the importance and urgency of the market, and agreed immediately after the small and medium-sized enterprises established financial services subject research team, in the pearl river delta, Yangtze river delta and minnan region triangle investigation. According to the understanding of 2006 in socgen relevant working meeting of "533 engineering", by 2010, the bank will cultivate high-quality sme credit customer 2 million new small and medium-sized enterprise quality credit asset 3,000 million, establish three small and medium-sized enterprise characteristic products series. In march of 2006, the industrial bank officially launched "on smes financial services pilot. For small and medium-sized enterprise customers convenient, quick, can consider the financing needs of small and medium-sized enterprises tailored specifically for the examination and approval procedures set, small and medium-sized enterprises, and green channel with more scientific ideas, improve the efficiency of approval for examination and approval. April 1, 2006, will start at societe generale, hangzhou, guangzhou, nanjing, ningbo, quanzhou and zhangzhou six branches in small and medium-sized enterprise financial services, the pilot smes' credit approval of "green channel". By 2010, feb. 9, Industrial Bank and fujian sme credit guarantee limited liability company again in fuzhou signed 423

the strategic cooperative agreement. According to the agreement, Industrial Bank to fujian sme credit guarantee to provide total limited liability company is about 20 million, the forehead intent on both sides will sme financing services business cooperation, full of exploratory and innovative spirit sme financing guarantee mode, solve problem of small and medium-sized enterprises, and guarantee to prevent and dissolve the sme credit risk, support rapid and healthy development of smes. Since founded in 2009, Industrial Bank spilling of small businesses gradually realized the financial services of professional operation and management, and successively in fuzhou, xiamen, quanzhou, guangzhou, shenzhen, nanjing, hangzhou, ningbo, chengdu, wuhan, ten cities such as small, founded in the construction of small business, professional service system. In the current smes financing and guarantee generally difficult situation, the joint-stock Banks can according to its own characteristics of small and medium-sized enterprises can add specialized departments and agencies and organizations related personnel, according to the different small and medium-sized enterprises, develop different smes' credit business development plan, and can also set up a set of expanding the small business rapid examination mechanism. At the same time, from the perspective of the credit standards, the credit mess solve experience to social relational credit phase transition, the credit stage only when the enterprise credit awareness becomes a consensus, credit problems will be completely resolved. Secondly, the joint-stock Banks for small and medium-sized enterprises should actively develop the characteristics of credit. At present, under the environment of the market for small and medium-sized enterprise characteristics of credit product has wide development space. Some scholars that Banks can establish credit relations on the basis of series, in order to provide financial services for enterprises, and the formation of enterprise information, which in fact control against the borrower moral risk, share the revenue growth. Needle financial products will vary for their clients, to determine the survival and development of the corresponding to different product structure, should the customer group. As the personal management socgen loan business - "industrial upgrading," the business of it again with subject, and quickly, easily also, the high limit cost five characteristics, and "save" personal "industrial business loan" maximum expand the scope of subject, credit "as business operators, enterprises and partnership, limited liability company's main partner or shareholder, the main natural can put forward to the bank loan application. Therefore, share-holding commercial Banks in the risk control, under the premise of reduced smes' credit entry, functional diversity, flexible varieties of credit guarantee, according to the actual situation of small and medium-sized enterprises can satisfy different customers, in the business community needs while actively develop rich content, the various forms of marketing and promotional activities, such as in the news media introduces characteristics of small and medium-sized enterprises bank credit product credit business. The personnel sent into the industrial zone, small business varieties, through publicity to business owners, the enterprise executives, finance department, etc. Products, Therefore, according to different enterprises, provides different credit, and the characteristics of small and medium-sized enterprises credit guarantee products can greatly, and promote the role of commercial bank financing smes confidence. Finally is according to the practical situation of differentiation of financing strategy area. In coastal areas, the private economy developed places, financing smes compared to the demand, the mainland is relatively low. Financing facilities area to take root, also make business enterprise of high dependence on financial services, thus sme financing business requirements. Therefore, in small and medium enterprises to carry out regional business financing, financing strategy, the differentiation of the priority of the arrangement for the appropriate scale, smes' credit to each region characteristic of small and medium-sized enterprise credit market. Although at present the loan problem of small and medium-sized enterprises is still a topic, but no matter how, according to results of smes' credit problems will have further breakthrough. For small and medium-sized enterprises in financing, except on the question of policy and institutional tilted support, still should vigorously promote honesty education and cultivation of social capital, but the social capital is not lasting stability, when its financial credit of the defects of the circumstance, still need to government and financial industry, to make up for the defect of social capital itself. Other 424

countries in the world by the government for the establishment of small and medium-sized enterprises to promote the service policy Banks is the development of national economy, effective measures. Therefore, we should not only see small and medium-sized enterprise credit risk, but more to see small businesses can make greater market, China's financial system from the existence of small and medium-sized enterprises in financing and financing mechanism, accelerate the phenomenon to establish and perfect the sme financing policies to support the development of small and medium-sized enterprises. Small and medium-sized enterprises in China will become the emerging and major credit market, become the subject of independent innovation of small and medium-sized enterprises to develop, so the financial business operations of commercial Banks in China is the inevitable choice of structural transformation. References [1]. Jiang Qiwu, Zhou Haowen. Bank of Credit Management [M]. Beijing: Higher Education Press, 2004.315-316(in Chinese) [2]. Wu Qin. Financing of SMEs in China and Countermeasures of [J]. National Business, 2008.02:82-83(in Chinese). [3]. Yi Changjun. Theory from the financial symbiotic harmonious development of the financial environment in China[J]. Business Times, 2008.08:77-78. (in Chinese) [4]. Zhao Yujuan. On the SME credit in the bank credit benchmark problem [J]. Trade Research, 2004.05:82-85. (in Chinese) [5]. Ma Weihua. Establish and improve long-term operational risk management mechanism [J]. China's financial, 2005,(16). (in Chinese) [6]. Zhao Jiang, Feng Zongxian. Relationship lending to SMEs to solve the credit problem? - Bertrand oligopoly established under the framework of theoretical models [J]. Explorations, 2006.08:17-19. (in Chinese) [7]. Wang Xiao, Zhang Jie. Bank credit rationing and small loans [J]. Economic Research, 2003.07:08-09. (in Chinese) [8]. Xiong Weiguo. China issues commercial bank loans of small and medium enterprises [J]. Enterprise economy, 2007. (12). (in Chinese) [9]. Guo Zhifang. "McMillan shortcomings" and the financing of SMEs in China [A], economic issues, 2005.8:49-50. (in Chinese) 425