The Research On Loan Pricing Of Microfinance Institutions

In recent years, small economies-individual industrial and commercial households, small property owners, micro-enterprises, small and medium sized enterprises in China have become more and more important in the economic development process, and have become a force that cannot be ignored in the development of our national economy. But the financing predicament of small economies is also apparent, this problem has become an important bottleneck to inhibit further development. Since2010, with more and more private capital flows to the small loan companies, at the same time the country has introduced policies to encourage the development of small loan companies, making small loan companies developed rapidly in our country. To solve the financing problems of small economies, the key lies in how small loan companies determine a reasonable loan pricing.At present, small loan companies set interest rates is generally based on experience of supervisors and operating condition of the loan company, this is very subjective, and lack of science and rationality, pricing has a lot of problems. Because there is no suitable and feasible loan pricing model, which now makes some loan interest rates have been as high as30%or even because it is difficult to borrow to small loan companies, some of usury interest rates has more than100%on the market. It’s easy to arise to "adverse selection", and it is not conducive to the development of a microfinance company, and also has led to high costs of many micro-enterprise loans, financing difficulties, the development prospects are grim. In this context, the study on pricing research of small loan has become very important and urgent.A very important part of pricing is an accurate estimate of the credit risk of the customer, so the paper first build the microfinance credit risk assessment model,and the loans are divided into different grades. And under certain assumptions, using relevant historical data to estimation the default rates of different level loans, to estimate loss rates and thus get a different level of risk premiums, getting ready for the end of loan pricing and decision making. Secondly from various small loan company’s own conditions, combined with loan pricing principle and influence factors of loan pricing, through discussion and analysis of the benchmark interest rates and risk premiums, construct a revised loan pricing model-based on the credit rating benchmark rate plus point correction model. The model considers the loan company loan costs and expenses, and the core is the risk premium, taking into account the loan companies target profit. So, the loan interest rates is composed by cost, target profit, risk premium, to ensure that the costs, expenses to compensation, target profit can be realized, the risk can be quantified. Combining the above two sections, microfinance institutions can price the loan accurately. Finally, we use this model to estimate an upper limit of the micro-lending rate by looking for some information. And the study can also provide a reference for government financial regulatory agencies, and help to ask the right policy recommendations for government regulators, small loan companies and loan customers.