Internet Finance, Financing of Small and Micro Enterprises and the Macroeconomy

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Abstract

ABSTRACT With regard to lending to small and micro enterprises (SMEs), the cost of traditional finance is mainly marginal. By contrast, the cost of Internet finance is mainly fixed, and the average cost of Internet finance is largely reduced. From the perspective of cost structure and size changes, we build dynamic equilibrium models. We prove that the transition from traditional to Internet finance will increase the number of SMEs obtaining loans and the aggregate output. We also conduct a quantitative analysis with the result revealing that Internet finance will increase China’s credit-access SMEs by 619.91% and aggregate output by 2.72%.