Abstract
In practice, group lending is a lending method for SMEs with high repayment rate. Theoretical and empirical researches demonstrate the improvement of the credit market by group lending from the bank's perspective, which prove that group lending has information advantages and has extrusion effect to the risk group. This paper studies the function of group lending to relieve the situation of SMEs' finance problem from the SMEs' perspective integrating the characteristics of group making. The research indicates that rather than individual lending, group lending can provide loans with better interest rate. The better interest rate can lower the success probability of the enterprises which meet the loan participation constraint condition and lower the yield requirement of the borrower's project, and finally improve the loan chances of SMEs.
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