Research On The Risk And Prevention Of Micro Credit In China

Microfinance is a source of financial services for entrepreneurs and small businesses lacking access to banking and related services.the founders of the microcredit movement in the 1970s(such as Muhammad Yunus and Al Whittaker),have tested practices and built institutions designed to bring the kinds of opportunities and risk-management tools that financial services can provide to the doorsteps of poor people.Therefore,the modern use of the expression "microfinancing" has roots in the 1970 s when organizations,such as Grameen Bank of Bangladesh with the microfinance pioneer Muhammad Yunus,were starting and shaping the modern industry of microfinancing.Another pioneer in this sector is Akhtar Hameed Khan.At the beginning,the implementations of microfinance institutions are mainly various types of financial institutions and non-governmental organizations.However,up to now,microfinance has been expanded to almost all of the developing countries and some developed countries.In another word,it has been widely developed in the world.Chinese microfinance began in 1990 s.Microfinance,as a kind of system and method which is different from traditional finance,has played an important role in providing sustainable and effective credit services for farmers and low-income groups.Along with our country continue to increase the rural investment and small micro enterprise financing,the microfinance industry is facing to a huge market demand and good policy environment,and it is expected to become an important force in the financial market.As an innovation of finance,the microcredit company has been supported by the government,in order to improve the credit activities of the low income group.Although the microcredit provides a small amount of loan,the rapid turnover of loan products can increase the risk to a certain extent.And because of the loan personal credit,scattered loan persons,varied loan period,credit investigation difficult,the risk of microfinance not only includes the risk from the general loans,but also includes some special types of risk.At present,microcredit is gradually improving,and the service is expanding to the city.However it mainly serves to the "three rural issues”,relating to rural development in mainland China,which are agriculture,rural areas and farmers.Microcredit and general financial institutions,the inevitable existence of loans may not be able to recover every loan.Because of the particularity of the service,microcredit also has its own characteristics of the risk forms,and the risk could be divided into five categories: natural risk,market risk,moral risk,legal risk and operational risk.Risk management as a corporate management activities,originated in the United States in 1950 s.At the beginning,some large companies in the United States had a significant loss,and the company's top decision-makers began to recognize the importance of risk management.Risk management is a relatively independent field of management functions,mainly related with the enterprise's operation and development goals.Risk management,enterprise management,and strategic management have very important significance among them.Control of microcredit from the perspective of risk management,mainly includes four aspects: to strengthen the standardization of operation management;to build the policy system;to establish and improve the integrity of the file management;and to improve the microfinance fund security by sharing information and extension services.Specifically,in order to reduce the microcredit risk of financial institutions,predictive advices include five aspects as below:(1)To establish an effective credit rating system.Credit is the trust which allows one party to provide money or resources to another party where that second party does not reimburse the first party immediately(thereby generating a debt),but instead arranges either to repay or return those resources(or other materials of equal value)at a later date.In other words,credit is a method of making reciprocity formal,legally enforceable and extensible to a large group of unrelated people.Establish a sound social credit system,is the necessary conditions for the construction of good faith,to improve the market mechanism,deepen reform,and accelerate the transformation of the urgent need.An agency may rate the creditworthiness of issuers of debt obligations,of debt instruments,and in some cases,of the servicers of the underlying debt,but not of individual consumers.(2)To establish a diversified social service system with the customer as the center.To promote the construction of the service system to the customer as the center ",it should process marketing work as the starting point,actively promoting the construction of customer service capabilities.(3)To build a flexible use of installment system and the peasant joint guarantee system.In order to improve the peasant loan management system for processing optimization,it should establish and perfect the sharing mechanism of the peasant loan risk and lower loan interest rates.The establishment of the peasant loan risk should include compensation fund.The establishment of a unified national rural credit information management system should collect farmers' credit information,and solve the problem of bank information asymmetry effectively.Furthermore,it should improve the credit risk prevention and control mechanism.(4)To increase the policy support for small farmers credit.(5)To enhance the credit risk control technology.Credit risk prevention involves a wide range,complex internal relations and high technical content.Regulating lending process is the source of the good wind control.Establishing early warning mechanism would improve the risk system.Improving the risk early warning platform,will comprehensively timely realize the risk early warning.Strengthening staff management would improve the quality of personnel loan.The risk of microfinance from the aspects discussed as above,some specific analysis on the risk prevention of microfinance in China are studied,and further refining the microcredit measures mainly includes three aspects: constructing credit system,building the relevant policies,laws and regulations science,and training management staff.The orderly healthy development of Chinese microcredit cannot be separated from the above three aspects of the system,Chinese economic take-off cannot ignore the rapid development of microcredit.