Statistics shows that the growth rate of various loans in China has been above 13% in the past few years. In 2018, the growth rate of commercial banks' loans for small and micro-sized enterprise (SME) reached 21.79%. In 2019, the China Banking and Insurance Regulatory Commission(CBIRC)required the outstanding balance of SME loans of state-owned large commercial banks to rise by more than 30% from the beginning of the year, and asked city commercial banks to better serve SMEs in lower-tier cities. To reach these goals, fintech has become a powerful tool to drive banks’ retail financing, serve SMEs in small towns, and control credit risk.
The Chinese government has been encouraging banks to implement inclusive finance and support the development of SMEs in recent years. However, SMEs still face difficulty in obtaining financing due to a high cost of financing. The key issue is the information asymmetry between SMEs and banks. SMEs usually have high-frequency demands for micro-financing, so the demand and market size are undoubtedly large.
However, from the perspective of supply, traditional financial institutions such as banks need to evaluate credit risks with a series of specific financial and non-financial indicators from risk control considerations. Such SME data is not as complete and standardized as for large enterprises, so it costs banks a lot to do risk assessment. These high costs, plus the complicated lending processes, are too much of a burden for banks to make a profit.
Therefore, if the problem of information asymmetry could be solved, and banks did not have to follow the traditional process, then a huge amount of costs could be saved, and SME financing would experience explosive growth. From this point of view, solving the problem of information transparency with fintech solutions will greatly improve financing for SMEs, and activate the retail business of banks. Pintec Academy did an in-depth research on current financing issues faced by SMEs. We find out that the development of digital lending might be a good way to address these issues.
The series article by Pintec Academy analyze the application of digital lending in different fields including payment, e-commerce, tax and logistics as well as the benefit, convenience and challenges it has brought to the SME financing.
Chapter I: Leveraging Fintech to Support Financing for SMEs
Chapter II: Digital Lending to Facilitate SME Financing
Chapter III: Rise of Loans for SMEs on E-commerce Platforms & New Financing Challenges
Chapter IV: Simpler Access to Credit Through Aggregate Payment
Chapter V: Combining Logistics With Finance
Chapter VI: Fintech Business Model of Taxation Loans for SMEs
Conclusion: Moving Forward