Research On Risk Control And Innovation Of Petty Credit Loans

This paper argues the feasibility and value of petty credit products by analyzing the Internet's petty consumption loan.The paper for the first time classifies the cash loan as a kind of petty consumption loan and through comparative analysis,it is concluded that cash loans are not proprietary products of petty loan companies online.Banks,consumption finance companies,and e-commerce-controlled Internet petty loan companies design their corresponding cash loan products based on its own advantages.For the first time,this paper separately studies the microfinance products from the industry.The cash loan phenomenon that appeared in the early stage of petty consumption loan is attributed to industry reasons,and the reasons for its “stigma” are analyzed from the perspectives of excessive industry growth,industry operation mode,legal supervision gap,and imperfect personal credit information.Petty consumption loan is characterized by small amount,dispersion,and simple credit.Compared with traditional credit,based on the characteristics of small amount of dispersion,the difficulty of petty consumption loan lies in the construction of the risk control system.This paper demonstrates the feasibility of petty consumption loan risk control from the perspective of repayment willingness and repayment ability.Finally,this paper looks forward to the development of petty consumption loan from the perspective of supervision.The paper summarizes the reasons for the stigma of cash loans as the following five points: first,the lack of supervision in the early stage of the industry,the early participants of the industry obtained huge profits via high interest rates,profiteering collection,and so on which attracted more capital into the industry and resulted in rapid expansion of the industry's low quality.Second,during the period of industry expansion,traffic is the core competitiveness.In order to seize the excessive marketing of the traffic,the participants would issue loans to unqualified borrowers with almost no risk control.Third,in order to compete for the market,the participants increased the leverage ratio and expanded the business scope by disregarding the requirements of license leverage and business scope which spread the risk to other financial institutions.Fourth,the personal credit information system is imperfect,the information isolation between platforms leads to borrowers being able to raise debts through long-term mutual debt.However,in this way,the loan term is extended in disguise.In the case of a small short-term credit with a relatively high borrowing rate,the absolute value of the principal and interest is extremely high,which makes the borrower's originally difficult financial situation worse.Fifth,the platform faces high bad debt rates and can only maintain its operations by increasing interest rates and collecting revenue.Unscrupulous platforms are profit-collecting,causing inconvenience to the borrower's life,and individual borrowers are overwhelmed by excessive behavior.Under the media reports,public opinion has made the cash loan the stigma of “senior loan”.The “small and scattered” risk control goal of petty consumption loan is to control the risk of fraud,select target customers,conduct reasonable pricing,and stabilize and large enough customer groups that will eventually have a relatively stable non-performing rate.This paper divides the feasibility of risk control of petty consumption loan products into two parts-the borrower's willingness to repay and repayment behavior.Compared with the perfect personal credit information system in the United States,Baihang Credit,China's personal credit information company has been established.In the future,more “long tail” people's credit information will be recorded,and it will affect all aspects of people's livelihood.The improvement of the personal credit information system has a far-reaching impact on the petty consumption loan companies breaking information islands,eliminating malicious fraud,reducing the cost of platform data acquisition,and controlling borrowers' long-term mutual debt.The establishment of a personal credit information system will increase the borrower's default cost and urge the borrower to repay the loan on time from the perspective of repayment willingness.In the fourth chapter,it analyses the borrower's repayment ability through the main factor analysis method and Logistic modeling analysis from the perspective of borrower's income,and the model of borrower default probability is constructed.The sample from the most recent year is selected to predict the default probability of the next year through the model,and calculates the platform profitability under the different borrowing rate.The big data risk control model can enable the borrower to fragment the value behind the data,measure the borrower's qualifications,and control the borrower's default probability to a certain level.In summary,when the personal credit information system is perfect,the feasibility and value of petty consumption financial products can be realized and the value of the product cannot be denied because of the early industrial chaos.At the end of this paper,we look forward to the normative development of petty consumption loan from the perspective of supervision.This paper argues that as a new type of credit,petty consumption loan should be operated in compliance with the various financial supervision systems.Campus violence and profiteering have touched the bottom line of the law,and finance should be innovative under the legal framework to reflect its value.Secondly,there is a correlation between the level of personal debt and social stability.The regulatory authorities should also supervise petty consumption loan from a macro-prudential perspective,control the spread of risks to other financial institutions,and maintain no systematic financial risks.Finally,petty consumption loan need to be supervised as an innovative financial product.Regulators should guide the development of the industry,stop the violations in a timely manner,protect consumer rights,and ensure the healthy operation of participating institutions.