Small loan company in China Legal Problems and Suggestions for Improvement

[Abstract]: In recent years the company gradually developed microfinance. In our economy on the specifications of its private capital, and promote economic development has a positive meaning. But because of its still in trial stage, the current number of small loan companies on the basic provision or provisions of the problem is still not yet unreasonable. there are still some legal issues: the creation of the high threshold, the regulatory body is not clear, low risk control. This will become a bottleneck restricting its development. In order to promote small loan company healthy and sustainable development, favorable to the development of small loan companies recommended: small loans for the development of the company to create a good legal environment, specifically the regulation of small loan companies and improve their own small loan company risk control capability.

[Keywords]: small loan companies, legal risk, regulatory body
In 2005, the small loan company in Inner Mongolia, Shanxi, Shaanxi, Guizhou, Sichuan Province, five May starts .2008 CBRC, the central bank jointly issued <"On the small loan company pilot guidance>>, small loan company the rapid development of a trial basis in April In 2009, China Banking Regulatory Commission issued a <<small loan company set up rural banks restructuring Provisional Regulations>> the small loan company pointed out the direction. As of the end of October 2010 has set up a small country Loan Company 2348. After several years of practical work, small loan companies made a good social effect in improving rural financial services, to resolve the difficult problem of SME financing has played a positive role.

1. The status of small loan companies
1.1 The nature of small loan companies and structure
Microfinance refers to the lower-middle class devoted to the continued provision of micro-credit services activities. Small loan company, is defined as natural persons, legal persons and other social organizations, enterprises invested in, does not absorb public funds, small business lending limited liability company or limited.

Small loan company is the enterprise legal person, independent of the corporate property, and all the property of their civil liability for its debts. Microfinance assets of the shareholders entitled to return to their rights and right to participate in major decisions and select the right managers, its subscribed capital contributions or the extent of its subscribed shares of the company responsible.

Small loan companies should implement the country's financial policies and financial policies, Laws and regulations to the extent permitted business, autonomous, self-discipline, self-financing, at their own risk, its legitimate business activities protected by Law.

1.2 The significance of the existence small loan company
Small loan company to solve some small, scattered, short-term funding needs, is designed specifically for SMEs in rural and lending companies. The existence and development has a vital role and significance. Mainly in the following areas: First, the small loan company has a flexible mechanism, simple procedures, without charge, without collateral, lenders and other commercial banks faster incomparable advantages to better serve rural and small and medium enterprises to provide financial loans to solve their survival and development the process of financing difficulties. Secondly, the existence of small loans help ease the company to attract private capital to address the credit chaos of civil status, to achieve formal financial transition to private finance. Third, to the intensification of poverty, and promote rural economic development and prosperity and stable development of socialist society.

2. Small loan companies are the main legal issues
Small loan company achieved explosive growth in recent years, China's credit market is an important part and added strength. But there are also some of its business legal issues.

2.1 The establishment of small loan companies there are legal loopholes
China Banking Regulatory Commission and the central bank's <"On the small loan company pilot guidance>> states:" The application for the establishment of small loan companies, government departments should make a formal request for approval to the local administrative department for industry and commerce to apply for registration procedures and obtain a business license. "Formally qualified small business loans approved in the company as an administrative permit. with <<view>> requirements to enable the legal basis for the lack of administrative licensing. Since, by << Administrative Licensing Law>> was set up by the main body of the administrative licensing should be Laws, administrative regulations, local regulations, if the above subject are not required, do need to immediately implement an administrative license, can the provinces, autonomous regions and municipalities to establish rules and regulations temporary administrative licenses. small loan company only by the <<view> "to determine the administrative licensing is the lack of legal basis.

In addition, the establishment of small loan companies high threshold. According to the provisions of small loan company the main sponsor of the "net assets of not less than 5,000 yuan (less developed counties of not less than 20 million yuan, asset-liability ratio no higher than 70% , consistent earnings and a total profit of 1500 million (a minimum of 600 underdeveloped counties yuan ", the company provides small loans to ensure risk control ability, but to discourage a lot of investment intermediaries. This leads to a lot of intangible investment intermediaries transformation in the direction of the underground banks, which will be detrimental to our financial stability and development.

2.2 The regulation of small loan companies is not clear
<<View>> said "Those who can clear a provincial government authorities (Office of or related financial institutions) is responsible for the supervision of the management of small loan companies, and small loan companies willing to take responsibility for risk treatment, only in the province ( regions and municipalities) of the county set up within the context of small loan company pilot. "micro-loan company that is designated by the provincial government's Provincial Financial Office or relevant agencies responsible for supervision and management, and bear the possible loss of the pilot failed, but the above do not have the qualifications of the main administrative body. In practice, the "relevant institution" in the end is what agencies, so far, there is no a clear legal provisions for this. Moreover, the lack of a unified scientific regulatory standards around the in the end of the regulatory body to regulate what is not from one voice. the many problems caused by small loan companies for long gaps in regulation or supervision, to monitor the operation lost maneuverability, a mere formality. Once a new thing regulation out of whack, it will make the competition disorder, and even lead to some legal loopholes criminals drill for small loans companies, hindered its development, is not conducive to national economic stability and development. With the pilot gradually running track, this regulatory approach needs to be further changes.

2.3 micro-credit system, risk
2.3.1 the use of funds small loans without effective constraint mechanism. The one hand, micro-credit fund management difficult, loans for household, small amount of money, credit and human and there is any credit problems. Another On the one hand, a considerable part of farmers to micro-credit funds free for other purposes, even as money to help the poor free of charge, on how to use micro-credit funds is the lack of technical support and confidence.

2.3.2 microfinance funds withdrawn from circulation the lack of reliable protection mechanisms. Microfinance loan recovery cases, depending on household income. Due to lack in-depth understanding of the project, the project can not be implemented as originally envisaged, or suffered natural disasters, resulted in unsustainable losses, farmers have no way to repay the loan on schedule, micro credit funds of the mills will be difficult to guarantee.

2.3.3 the operation of microfinance lack of an effective compensation mechanism. Microfinance interest rates in China are strictly limited, the interest rate is usually lower than normal interest rate commercial loans, small loan companies which manage costs and stay high conflicting cost of bad debts, so the micro-credit operation is difficult to effective remedies. To make the sustainable development of small loan companies, the need to support the Government to provide compensation.

In addition, small loan company provides services to three rural industries and small enterprises, small-scale clients, most of them poor credit rating, poor qualifications. In practice, a number of small loans to the company's own rules and regulations are not sound, management non-standard, the staff lack the necessary expertise, in the face of the rural credit system is not a sound overall environment, to an already high risk of small loan companies even more anti-risk ability to thin out. Links to free papers Download Center http://www.hi138.com 3. Promote the development of the proposed small loan company
3.1 clearly the specific nature of small loan companies
Pilot of small loan companies have been 5 years, microfinance institutions have also announced a pilot approach for 3 years. But the community's understanding of small loan companies to reach a consensus yet. So far, small loan companies are not as financial institutions, therefore, not entitled to state a series of preferential policies for rural finance. For example, do the same rural finance, and if financial institutions, commercial banks will be included business tax relief, etc., but the small loan companies, for most provinces in that no such concessions. According to industry sources, some small companies, including business tax credits, income tax, etc., the tax rate as high as 33%. The expectations of society and the government has the burden of microfinance institutions do not assume the light of social responsibility. nature is unknown the development of small loan company the largest risk. Therefore, small loan companies need to be clearly the nature of financial institutions.

3.2 The special legislation for the small loan company
Small loan company as a new phenomenon in China's development is still in its infancy, the Law is far from perfect, which calls for all sectors of society to create a favorable legal environment, speed up <<small loans Law>> the introduction.

The central bank, China Banking Regulatory Commission jointly issued the <<view>> and the China Banking Regulatory Commission to develop the <<Interim Provisions on Administering Loan Companies>> all small loans to the company's operations on the proposed program of specific guidance, but the legal hierarchy between the two is too low, supporting imperfect laws and regulations. As a pilot operation, States should, where the introduction of <<small loans Law>> and other high-order special laws to regulate the small loan companies.

Should be clear in the legislation the nature of small loan companies, standard to establish a system to identify specific authority. And, in the introduction of special laws, the state should pay attention to coordination between the various laws and regulations, there are inconsistencies in its provisions should be necessary modifications, to promote the further development of small loan companies.

3.3 Strengthening the supervision of small loans company
First, we must determine the company's director of microfinance regulatory body. The competent department authorized by law subject to the company's access to small loans, the company running the operation and exit of all the regulatory process. At present, the pilot micro-credit in the country the company's regulatory body as large as the following: First, by the Finance Office is responsible for monitoring, and second, by the People's Bank is responsible for monitoring the establishment of three new independent body responsible for monitoring and fourth, the banking supervision department is responsible for supervision. With the small the amount of loans the company gradually enriched the experience of the pilot, the Government should monitor to measure the pros and cons of various regulatory body, legal form to be finalized, to regulate the small loan companies.

Secondly, to strengthen industry self-regulation. Government regulation is important, but with the small loan company matures, the accumulation of experience, the Government should weaken its regulatory efforts, can play a role in macroeconomic regulation and control can be. And industry regulation should be gradually become the main form of supervision .2011 year, China will set up a joint microfinance institutions, and its micro-credit institutions by the national nonprofit initiative established by self-regulatory organization. Its establishment is conducive to China's microfinance industry standards and can be sustainable development. microfinance institutions in the future should be based on Joint Committee on the small loan companies as the main regulatory body, to play a greater oversight role.

Third, strengthen cooperation in banking regulation and public oversight. Cooperative banks also control the operation of small loan company funds between all of the information, local cooperative banks in the choice at the same time determine the cooperative banks have the responsibility of monitoring small loan company. While strengthening social supervision . that local governments can establish the system of reporting prize, for the presence of illegal fund-raising, violent noisy in the small loan companies reporting prizes, arouse the enthusiasm of social supervision.

3.3 The ability to improve risk control
Small loan companies should further improve the corporate governance structure, develop effective and feasible implementation of company rules and regulations and ways to employ people with expertise to enhance the business training of staff, establish and improve risk protection fund system. The Government and relevant departments should gradually establish credit rating and incentives to improve awareness of small borrowers to repay. At this stage, small loan companies can only own capital loans, and "only the credit does not exist" and can not absorb the deposits. But investors funds After all, limited, lack of funds is another major development of microfinance institutions bottleneck. In this regard, small loan companies eligible for the rural banks can be upgraded. Meanwhile, the Government can timely and appropriately relax the financing channels for small loan companies, and gradually allow the small business performance is good, excellent credit history of small loan companies through lending, deposits and other funding sources to expand, but also with a certain financial strength of private enterprises, and expand financing channels for small loan companies to improve risk control to ensure its sustainable development. Links http://www.hi138.com Research Papers Download