The Small Credit Risk Management Of Commercial Banks

Microfinance product was firstly used in Bangladesh rural banks in the1970s, and was just one of government’s anti-poverty ways, namely a way of providing financing to the poor. In later time through the way of high interest rates、short term and the third party credit guarantee, it’s only provided to the business users who have a certain ability to repay, in order to purse a higher return on capital, achieving the dual purpose of bank’s financial sustainability and service to a specific target group, which provides a good example for the development of microfinance product in the financial sector. Therefore, many developing countries including China are following the practice of Bangladesh bank, and use the microfinance products to foster their countries’SMEs. Especially in recent years, the development of SMEs in China’s national economy is increasingly highlighting its important position, and its total annual output accounts for60%of national GDP, creating a75%employment rate for the city, paid taxes accounting for50%of the country’s total tax revenue. This makes our local commercial banks have also started microfinance for SMEs. When local banks develop this business, the risk management of microfinance products is particularly important, because in the bank’s management, the risk management of credit business is the core content, and is also one of the key research topics on the banking industry.The paper chooses the microfinance business of our country’s local commercial bank, using a combination of qualitative and quantitative methods to study the credit risk of the products which closely related with SMEs. Qualitative analysis based on microfinance economics theory and the risk control theory and method, interpretes the risk characteristics of SMEs in China, and describes some effective practices of the bank preventing such risks; while quantitative analysis starts from the perspective of risk limits management, making a collection of the historical data about western local commercial banks crediting small loans to SMEs as a sample, using econometric methods, according to the characteristics of the SMEs credit risk, using weighted least squares, to conduct empirical analysis and testing about the related economic variables that have an influence on the corporate finance and business management of SMEs credit risk limit.Through the above two-pronged ways of qualitative and quantitative research, this article hopes to explore modern local commercial bank’s microfinance risk control methods in our country, and put forward the approaches which are suitable for western local commercial bank’s small credit risk management in China.