CONTENTS
CONTENTS..................................................................................................................... I
LIST OF TABLES........................................................................................................... V
LIST OF FIGURES........................................................................................................ VI
LIST OF ABBREVIATIONS.......................................................................................... VII
DECLARATION.......................................................................................................... VIII
Chapter One - Introduction to the Thesis......................................................................... 1
1.1. Introduction....................................................................................................... 1
1.2. Understanding SMEs in China............................................................................ 1
1.3. Central government policy in China and how it influences SME lending.............. 3
1.4. Research aim...................................................................................................... 5
1.5. Research objectives............................................................................................. 5
1.6. The approach to the study.................................................................................. 5
1.7. Methodology....................................................................................................... 8
1.8. Structure of the thesis......................................................................................... 8
Chapter Two - Research Background and Literature Review........................................... 11
2.1. Introduction..................................................................................................... 11
2.2. Research Background........................................................................................ 11
2.2.1. The development of the SME sector in China........................................... 11
2.2.2. The development of the banking sector in China...................................... 13
2.2.3. The relationship between the banks and SMEs during 1978-2012............. 14
2.3. Literature Review............................................................................................. 17
2.3.1. Relationship Marketing........................................................................... 17
2.3.2. Relationship banking.............................................................................. 19
2.3.3. SME – Bank relationships....................................................................... 23
2.3.4. Social indicators which could be used to evaluate SMEs and SME owners 29
2.3.5. Credit evaluation systems in the West and in China................................. 39
2.4. The reasons for the difficulties which SMEs experience in obtaining loans.......... 47
2.4.1. Obstacles to bank lending to SMEs.......................................................... 47
2.4.2. An analysis of the obstacles...................................................................... 54
2.5. Summary.......................................................................................................... 58
Chapter Three - Qualitative Methodology and Interview Design...................................... 59
3.1. Introduction..................................................................................................... 59
3.2. The research methodology - a mixed methodology............................................. 59
3.3. Rationale for qualitative research...................................................................... 62
3.4. The data collection approaches and process....................................................... 65
3.5. The Sample and Questions for the interviews with the bank managers............... 68
3.6. Two pilot interviews with lending bankers......................................................... 72
3.6.1. Profile of the two participants in the pilot interviews............................... 72
3.6.2. Key points gathered from the pilot interviews.......................................... 73
3.6.3. Revision of the interview structures......................................................... 74
3.7. The execution phase of the interviews................................................................ 76
3.8. Summary.......................................................................................................... 77
Chapter Four - Analysis of the Interviews....................................................................... 78
4.1. Introduction..................................................................................................... 78
4.2. Key areas of the research................................................................................... 78
4.3. Overview of the theory...................................................................................... 78
4.4. Profile of the 10 interviews................................................................................ 80
4.4.1. Coding of participants............................................................................. 80
4.4.2. Recording and transcription.................................................................... 81
4.4.3. Color coding of paragraphs..................................................................... 81
4.5. Overview of the interviews with the 10 bank managers...................................... 81
4.5.1. Banking structures established to manage SME loans............................... 82
4.5.2. Overview of the lending strategies of the six banks................................... 83
4.5.3. Customized lending products offered by the banks.................................. 84
4.5.4. The evaluation process............................................................................. 85
4.6. Seeking target clients from networks - criteria developed from the “Social Capital” identified by the 10 bank managers (1)........................................................................................................... 86
4.6.1. Introduction............................................................................................ 86
4.6.2. Network 1 - The business circle：............................................................ 87
4.6.3. Network 2 - The industry association:...................................................... 89
4.6.4. Network 3----Supply chain...................................................................... 90
4.6.5. Network 4----Local people living in the same village community.............. 91
4.6.6. Network 5----Migrant groups.................................................................. 92
4.6.7. Network 6----SME owners who are long-term clients of the bank............. 93
4.6.8. Network 7---- New clients introduced by existing clients of the bank........ 94
4.6.9. Network 8---- The banks provide a platform............................................ 94
4.6.10. Discussion:............................................................................................ 95
4.7. Visiting SMEs’ plants and offices ---- criteria developed from the “Social capital” identified by the 10 bank managers (2) 96
4.7.1. Factors considered by lending bankers during the on-site visit.................. 96
4.7.2. Discussion............................................................................................... 99
4.8. Conduct a financial investigation----“Economic indicators” provided by the 10 bank managers, on which the banks focus their attention............................................................................................... 100
4.8.1. The SME’s “Current account”............................................................... 100
4.8.2. The bills or receipts provided by third parties........................................ 101
4.8.3. The intended use of the loan.................................................................. 102
4.8.4. The collateral being provided by the SME.............................................. 102
4.8.5. Continuous profitability........................................................................ 103
4.8.6. Discussion.............................................................................................. 104
4.8.7. Summary.............................................................................................. 105
4.9. Interview with the SME owner ---- criteria developed from the “human capital” identified by the 10 bank managers (1) 106
4.9.1. Factors considered by the lending bankers............................................. 106
4.9.2. Discussion:............................................................................................ 110
4.10. Investigation of the SME owner’s reputation through his/her partners and/or related persons ---- criteria developed from the “human capital” issues identified by the 10 bank managers (2)................. 112
4.10.1. Factors considered by the lending bankers in the investigation of the owner’s reputation 112
4.10.2. Discussion:........................................................................................... 113
4.11. The lending decision-making process.............................................................. 114
4.12. Towards a theoretical model of factors influencing loan decisions in SME-Bank relations 116
4.12.1. Introduction........................................................................................ 116
4.12.2. Overview of Model 1............................................................................ 117
4.12.3. Characteristics of Model 2.................................................................... 118
4.12.4. Explanation of Model 2........................................................................ 120
4.12.5. The relationship between Model 2 and the literature............................ 121
4.13. Findings which emerged from the interviews with the 10 bank managers........ 122
4.13.1. Important factors identified from the interviews.................................. 122
4.14. Summary...................................................................................................... 125
Chapter Five - Quantitative methodology and questionnaire design............................... 127
5.1. Introduction.................................................................................................... 127
5.2. Rationale for the quantitative research methodology........................................ 127
5.3. Overview of the analysis of the interviews with the 10 bank managers.............. 130
5.3.1. To consider the cost to the SME owner of defaulting.............................. 130
5.3.2. To determine the repayment capability of the SME owner...................... 130
5.3.3. To determine the SME owner’s willingness to repay the loan.................. 131
5.3.4. To investigate SME owner’s reputation.................................................. 131
5.4. Themes of the questionnaire............................................................................ 132
5.4.1. The first draft of the questionnaire........................................................ 132
5.4.2. The second draft of questionnaire (the first pilot survey)........................ 139
5.4.3. The third draft of questionnaire (the second pilot survey)...................... 140
5.4.4. The fourth draft of questionnaire (the third pilot survey)....................... 141
5.5. Methods of the analysis of the questionnaire survey......................................... 143
5.6. The execution phase of the questionnaire survey.............................................. 146
5.7. Summary........................................................................................................ 147
Chapter Six - Analysis of Questionnaire Survey............................................................. 148
6.1. Introduction.................................................................................................... 148
6.2. Key areas of the research interest..................................................................... 148
6.3. Profile of the questionnaire survey................................................................... 148
6.3.1. Timeline................................................................................................ 149
6.3.2. The participants.................................................................................... 149
6.3.3. Review of the themes of the questionnaire survey................................... 149
6.4. Overview of the SME owners (Questionnaire Theme 1: To gather knowledge of the SME owners) 149
6.5. Overview of SMEs (Questionnaire theme 2: To gather knowledge of the enterprises) 159
6.6. The relationship between the banks and SMEs in the context of credit worthiness (Questionnaire theme 3: To gain information about SMEs’ experience in securing their first loan)............................ 169
6.7. Results of the testing of the loan criteria (Questionnaire Theme 4: To test the criteria gathered from the 10 bank managers).............................................................................................................. 183
6.8. Summaries of this chapter............................................................................... 200
Chapter Seven - Research outcomes and implications.................................................... 202
7.1. Introduction............................................................................................ 202
7.2. Aim and objectives of the research study.................................................. 202
7.3. Overview of the literature................................................................................ 203
7.4. Overview of the research design............................................................... 203
7.5. Overview of the Five-step Model...................................................................... 204
7.6. The characteristics of the Five-step Model........................................................ 206
7.6.1. The Five-step Model focuses on the process of evaluation, whereas most of the Western models and approaches focus on the evaluation factors......................................................................... 206
7.6.2. For increasing amounts of loans, the Five-step Model demonstrates the corresponding increase in evaluation factors; whereas the Western models do not place emphasis on the evaluation process changing in accord with increasing loan amounts.................................................................................. 207
7.6.3. The Five-step Model emphasizes the process of seeking target clients; the Western theories discuss in depth how Western bankers establish relationships with SMEs and how they maintain those relationships 207
7.6.4. The Five-step Model demonstrates that the banks in China employ economic and non-economic criteria in the evaluation of loans, as do the banks in the West.............................................. 208
7.6.5. The function of the Five-step Model and Western models is the same...... 209
7.7. The theoretical contribution of the Five-step Model......................................... 210
7.7.1. Personal relationship & Bank/SMEs relationship.................................... 210
7.7.2. Five steps evaluation & social and economic indicators........................... 211
7.7.3. A better way for the SME owner to get his first loan was by asking an old/existing client of the bank to give him an introduction............................................................................................... 212
7.7.4. Augmenting the Five-step Model............................................................ 213
7.7.5. Non-financial criteria used by banks are accepted by SME owners......... 215
7.8. The implications of the Five-step Model........................................................... 215
7.9. Implications of the research for SMEs in applying for loans............................. 216
7.10. Contribution to knowledge regarding policy and practice............................... 218
7.11. The limitations of the research....................................................................... 220
7.12. Future research agenda.................................................................................. 221
LIST OF REFERENCES............................................................................................... 223
Appendix 1: The definition of SMEs............................................................................. 239
Appendix 2: Preparation for interviews...................................................................... 242
Appendix 3: Introduction to 10 bank managers............................................................ 244
Appendix 4: Questionnaire Questions........................................................................... 246
Appendix 5:回顾中国政府对银行的放权进程............................................................. 251
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