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Study on Efficiency of SME Credit Guarantee in China

Jianbo Zhang

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Abstract

Credit guarantee is an effective way to solve the financing bottleneck for SME,but information asymmetry beteewen SMEs and credit guarantee institutions resualts in adverse selection and credit retioning.Akerlof proved that Pareto-Improvement can not be achieved because of adverse selection by his model about second-hand car market.Adverse selection reduces the efficiency of credit guarantee.It is very important to study the mechanism of adverse selection of credit guarantee and to give measures on how to prevent adverse selection of credit guarantee.

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What this paper is about

Credit guarantee is an effective way to solve the financing bottleneck for SME,but information asymmetry beteewen SMEs and credit guarantee institutions resualts in adverse selection and credit retioning.Akerlof proved that Pareto-Improvement can not be achieved because of adverse selection by his model about second-hand car market.Adverse selection reduces the efficiency of credit guarantee.It is very important to study the mechanism of adverse selection of credit guarantee and to give measures on how to prevent adverse selection of credit guarantee.

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Available abstract

Credit guarantee is an effective way to solve the financing bottleneck for SME,but information asymmetry beteewen SMEs and credit guarantee institutions resualts in adverse selection and credit retioning.Akerlof proved that Pareto-Improvement can not be achieved because of adverse selection by his model about second-hand car market.Adverse selection reduces the efficiency of credit guarantee.It is very important to study the mechanism of adverse selection of credit guarantee and to give measures on how to prevent adverse selection of credit guarantee.

Key concepts: Adverse selection, Bottleneck, Information asymmetry, Selection (genetic algorithm), China, Business, Mechanism (biology), Pareto principle

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