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In 2005, The People's Bank Of China decided to allow the establishment of small loan company and its policy that credit is included and deposit is excluded has attracted widespread attention since then. In the end of that year, the Rishenglong Small Loan Company was founded, which marked the new beginning of micro-credit. The emergence of small loan company has broken the monopoly of banking financial institutions, activated the rural financial market and provided customers who have different kinds of financial demands with differentiated products and services. In this paper, we analyze the present situation of Chinese small loan company and point out some problems it need to face in the process of their development. And in view of these problems, this paper puts forward constructive suggestions to ensure the sustainable development of small loan company in our country. Introduction Small loan company is a new financial model under the background of China’s rapid economic development, which provides the low-income groups with continuous and unsecured micro-credit. As an important part of inclusive finance, small loan company plays an inestimable role in easing the issues of agriculture, rural development and rural residents and solving the SME’s financing issue. Although there is a thriving scene in micro-credit industry, many problems still exist. As a single and immature model, small loan company needs to consider how to deal with numerous financial institutions’ pursuit or interception and how to achieve sustainable development. Literature review There are only a few studies on micro-credit theory at home and abroad. Just as Mr.Mao Yushi says, micro-credit theory needs more researches about practical operations and the establishment and maintenance of related institutions are also required. Many Chinese scholars’ researches are mainly about the risk control of small loan company and the suggestions on small loan company’s development. Zhou Zhongming thinks that there are four chief micro-credit risks including lack of effective accountability, unsound restraint mechanism, insufficient safeguard mechanism of loan recovery and compensation mechanism of small loan company. He also puts forward measures to dissolve these risks such as dividing the level of loan demand, projecting market operation and relying on governmental financial subsidies. Zhang Xiaoqian considers that seeking funding from big banks is the only road for small loan company and its operation mode that credit is included and deposit is excluded cannot go on for a long time. Compared with the domestic theoretical research, foreign scholars pay more attention to exploring the practical operation of small loan company and their research is limited to the study of the definition or evaluation of small loan company. A British scholar called Martin says that the majority of small loan companies promise to Joint International Social Science, Education, Language, Management and Business Conference (JISEM 2015) © 2015. The authors Published by Atlantis Press 56 reduce poverty but they are facing increasing pressures which result from the following aspects. First, they want to expand their coverage rate in the market but it doesn’t mean that they can cover the area of poverty. Second, they need increase in order to realize the aim of the scale economy and financial self-sustaining. Last but not least, the amount of donors in the original capital is so finite that it is necessary for micro-credit to get the commercial capital. With the deepening exploration of small loan company, the methods and theories in research will reach unanimity both in China and abroad. So risk control will focus on several points such as perfecting the laws of micro-credit, accelerating the reform of financial system and strengthening financial regulation. Present Situation and Development Bottleneck of Small Loan Company The number and scale of small loan company in China have increased rapidly since the SFC issued Guiding Opinions On The Pilot Of Small Credit Company. In the end of 2008 the number of small loan company is less than 500 while by the fourth quarter of 2013 its number is up to 7838 and total assets are 819.127 billion yuan. However, this record was broken again by the end of June 2015. The data shows that there are 8951 small loan companies, employing 114000 people, possessing 959.416 billion yuan. Favorable macro-environment contributes a lot to the rapid development of small loan companies. First of all, the political environment supports the development. From Interim Provisions On The Administration Of Loan Companies to Small Loan Company Management Approach (Draft), the government has continually promoted the management and development of small loan companies, which making the whole industry more confident. Second, the thriving scene in small loan companies owes to the economic environment. With the deepening reformation in Chinese economic system, SMEs has become an important force in economic development. Besides, as an agricultural country, the issues of agriculture, rural development and rural residents have been big problems in the urbanization process. The emergence of these two problems helps promote and accelerate the process of the micro-credit industry, and some historical data really reflect that small loan companies have a big effect on solving financial problems of the two part. Although the number of small loan company is still on the rise, the speed of its growth has slow down significantly from the second quarter of 2014. The unbalanced development of small loan company has been highlighted. Compared with mid-western areas in China, mid-eastern areas have advantages both in quantity and quality. According to the statistics of the People's Bank Of China, more than 15% of small loan companies are facing the loss situation. Some of them even have to get out of the market. Thus it can be seen that small loan companies are faced with development bottleneck and many disadvantages are gradually appearing. (a) Lack of adequate and effective source of funds The government indicates clearly that there are three parts making up small loan company’s funds including original shareholders' capital contribution, donation and money from other financial institutions. It is not hard to see that there are some restricting factors in the three sources of funds. First of all, small loan company can only get a little support from the original shareholders’ capital contribution due to the small scale of these small loan companies and their limited numbers of shareholders and capital. Second there are only a few charity organizations that are willing to donate and large institutions are seldom willing to donate a large funding. Finally it is about the commercial banks. The main capital source channel of small loan companies is commercial banks. But the loan interest rate is over the primary interest rate and even much higher than Shibor. Moreover, micro-credit company operates the loan business. However, if its own funds

Analysis of the Present Situation of Chinese Small Loan Company and Its Sustainable Development