China Postal Savings Bank Of Chengdu Branch Merchant Guaranteed Loans Risk Analysis

In 2009, Postal Savings Bank of China (PSBC) officially launched its small loans business, which has helped large numbers of business owners and merchants who are in need of capital (usually not large) for their production and business activities, which also was a positive response to the requirements from the government that postal savings funds be guided back into rural areas and micro-credit businesses be promoted to support production and commerce there. This paper centers on empirical studying on Joint-Defense micro-credit business. Joint-Defense micro-credit is a short-term loan, which aims at small business owners, who in order to apply for a micro-credit, must form groups of three, where they assume liability and mutual responsibility on each other to make up a body of joint-security.More and more credit risks, however, began to surface, with the rising of total amount of joint-defense loans. Compared to its overseas competitors like Grameen Bank of Bangladesh and People's Bank of Indonesia, PSBC still has a long way to go on micro-credit asset quality control. Its loans non-performing rate is also much higher than its foreign counterparts. These all hinder the long-term, healthy and sustainable development of PSBC's micro-credit business.This paper targets the joint-defense micro-credit business and is based on three actual cases from some branch of PSBC. It tries to analyze how the lack of a credit rating system in China and the loopholes in the laws concerning agency relationship and joint-defense system affects PSBC's control of risks and why the bad-loans-ratio has been keeping climbing. It then proposes practicable measures and advices for amendment.This paper, hopefully, might contribute to the research and exploration in this field, trying to suggest a way to effectively manage the risks concerned and promote the sustainable and healthy development of the financial and credit market.