Analysis of Credit Risk Management in Small and Micro Businesses with Moral Hazard Model

ABSTRACT

Small micro enterprises have effectively promoted the economic growth and technological innovation and created a lot of financial income for our country, which are not only the main force of the economic growth in our country, but also the basic cell and lifeblood of the economy in our country, however, financing difficulty that small micro enterprises suffer from is an inextricable problem which is hard to crack for a long time. Now, under the dual drive of the external competitive pressure and the assessment of internal profit, domestic commercial banks see it as an opportunity of business development and transformation to vigorously develop small micro credit business in succession, therefore, they enlarge the input of manpower, material resources and financial resources increasingly and aim to develop a vast new world in the small business. However, the credit risk problem of small micro enterprise has hindered the advance of commercial bank. Management of credit risk in small and micro enterprise will directly restrict healthy and rapid development of small credit business. Therefore, scientific and effective credit risk management for small and micro enterprise has become an imperative issue for domestic commercial banks to develop small credit business. This paper, based on moral hazard model, analyzes the deeply-rooted cause of the credit risk in small micro enterprise and further puts forward to the relevant strategies to solve the financing obstacles of small micro enterprise combining with domestic commercial banks’ traditional experience in credit risk management.

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