In Search of the Best Interest Rate for Group Lending: Toward a Win–Win Solution for SMEs and Commercial Banks in China

Qin Shang, Zhenzhong Ma and Xueyang Wang

Chinese Economy, 2020, vol. 53, issue 3, 285-299

Abstract: To better help resolve the dilemma of more demand for bank lending and increasing defaulted bank loans, this paper develops a pricing model on SMEs’ group lending practice using a gaming method. The optimization method and the game analysis are used to model the dynamical interest rates of group lending in order to maximize the profits for SMEs and to guarantee basic income for commercial banks. A simulated empirical analysis is used to obtain the optimal lending rate and expected profits, and the results provide support for the proposed model. The result of this study provides valuable insights on designing effective incentives to encourage commercial banks to provide funds to SMEs and to encourage SMEs to pay back the loans to commercial banks, and thus is able to help resolve the funding dilemma between commercial banks and small and medium enterprises in China.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/10971475.2020.1722359 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:chinec:v:53:y:2020:i:3:p:285-299

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MCES20

DOI: 10.1080/10971475.2020.1722359

Access Statistics for this article

More articles in Chinese Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().