A Study On Avoiding Strategic Default Under Lending Group

On the capital market , the asymmetric information can result in moral hazard and adverse selection, which forces the bank to allocate the finical resource. That is,these middle-and-small-scale-enterprise which can't afford collaborations unable to get loan from banks. Group lending is successful in coping with this problem if it can be effectively used.and as a typical micro-credit,it can encourage the private information to be used completely between borrowers,and thus to alleviate the problem of information asymmetric.However,it has been proved by theory and practice that strategic default can usually lead to lending group fail to use.thus,how to keep the mechaninsm of lending group be effectively used is attribute to whether be succeed in resolving the problem of strategic default.This paper key points the restraint mechanism of strategic default and bulids math models to analyze the problem of strategic default by use of the theory of fair game from the perspective of information economics. In our analysis, we first build a two-person model to deduce how the problem of strategic problem produces, and we deem that excess joint liability usually lead to strategic default.and then the restraint mechanism could be divided into two parts according to the different roles in which the bank can play. Under the internal restraint mechanism, we can make use of the flexible group lending contract and joint benefit contract to restrain the behavior of strategic default,meanwhile, under the outer restraint mechanism, we can resolve the problem of strategic default by the use of social capital.Through the micro-level analysis, we can clearly see the the innovative design of bank loan contract and the full use of the social capital can be an effective way to prevent strategic default and to improve the operation efficiency of lending group.