Research on the SME’s Collateral Credit Rationing under Loan Risk Compensation Mechanism

Abstract

This paper discusses the function of loan risk compensation in the collateral credit rationing model. According to the derivation of my model, we find when the bank have some requirements on interest and collateral, at the same time, we add the loan risk subsidy variable into the above model, loan risk subsidy can lower the bank's collateral requirements for the enterprise, therefore, we can conclude that loan risk compensation can effectively alleviate the credit rationing faced by enterprises.