Lending technology and credit risk under different types of loans to SMEs: Evidence from China

This paper analyses lending to small and medium-sized enterprises (SMEs), including the lending technologies used and the default risks for loans of different types using loan data on Chinese unlisted SMEs from 2010 to 2013. We find that both credit loans and third-party-guaranteed loans are examples of transaction lending. However, due to the risk-sharing mechanism, the lending technology used by banks for third-party-guaranteed loans is not a common transaction lending technology. In terms of default risk, there is no significant difference between credit loans and collateralized loans. In contrast, the default risk for third-party-guaranteed loans is higher.