Research Of China SEM Loan Approval System

Whether in developed or.in developing countries, Small and medium-sized enterprise played a significant role, especially in providing employment, stabilizing society and activating economy.However, SMEs'the most major problem which encounters in the developing process is that their fund is insufficient, which in China is particularly severe. To solve the problem of financing SMEs, the state has introduced a series of policies to encourage and call in commercial banks to provide credit support. With the accelerated process of interest rate market-oriented, commercial banks expanded the credit support for SMEs. Nevertheless, from the SME lending, commercial banks get the high risks, which SMEs are unwilling or unable to repay loans, that is the credit risk. How to evaluate and mange the credit risks is a big problem that commercial bank facing in practice.The characteristics and the service targets of the SEM business determine its non-performing loan rate is usually higher than other loans, in addition, SEM institutions often do not conduct business in the advanced credit risk management mechanism, the loan decisions often made by a relatively high degree of qualitative analysis, which resulting excessive lending caused by incentives of the loan officers, as well as different levels of loan officers result in different standards, and high operational costs caused by maintenance of a considerable number of loan officers. These problems make microfinance credit risk management necessary. If you cannot effectively improve the level of SEM risk management, control the non-performing loan ratio, it is bound to hinder the healthy, rapid and sustainable development of SEM.Therefore, credit risk is the weak performance of the risk of trading partners. To the business institution the risk is the debtor unable to repay the debt. So, effectively manage the credit risk is the very important key to develop SEM.This article has a purpose of improving SEM credit risk management, summarizes the development of SEM in the history of our country, and the problems of risk management encountered in the development. Through the analysis of the international successful model, combines with practical work, this article gets a conclusion that credit scoring method is more suitable for evaluating the credit risk of SEM loans. Then selects the indicators of credit risk model, introduces logistic model and odds to determine the indicators and its'weigh. Then in accordance to logistic model deduce the loan approval system which can decide whether approve or reject their loan application. Finally, this article summarizes the limitations and shortcomings of loan approval system, and proposes optimal solutions.