Study On Credit Risk Management In Consumer Credit Based On Network Organization

The development of consumer credit can adjust consumers'consumption through different phases, solve the mismatch problem of demand and spending power. Thus it can expand the domestic demand and has great significance to China whose economic growth mainly depend on exports and investment. In fact, although the consumption in China is far behind that in the developed countries. The total consumer credit in China's financial institutions has increased a lot year by year with the guidance of government. It also shows the government has make a point of consumer credit's development obviously.However, compared with corporate loans, consumer credit has small amount in a single loan. It has a large number of dependent customers with great differences. So the task of risk management in consumer credit has been increased Moreover, China's personal credit information system isn't efficient. So it's difficult to obtain customer's credit history and the risk management become harder as well. Opportunism is not only a basic assumption in transaction costs theory, but also an important factor of borrowers' rational defaults. But opportunism is not a basic feature of human nature. People's behavior will be effected by the social economic system, organizational forms, etc. Therefore, opportunism can be avoided by create an effective system or organization. The generation of credit risk will also be prevented.Network organization is a new organizational structure. The network studied in this paper is a relation network with the lender and single borrower as nodes, the repeated cooperation as lines between them. In this paper, the transaction cost theory is a bridge to link the risk management of consumer credit and network organization. The feasibility of using network organization to solve consumer credit risk will be showed in Chapter 2 by analyzing the literature. The network organizations contained 2 nodes (relationship finance) and 3 nodes (group lending) will be constructed respectively in Chapter 3. The role network organizations played in the prevention of credit risk will be described by theoretical models and related theories from the two aspects: adverse choice and moral hazard.In Chapter 4, the fact that relations have a positive effect on the availability of loans will be demonstrated by the data collected from the ICBC's consumer loans. Then, community banks in America will be presented as the example of relationship finance to show relationship finance has a positive impact on both financial institutions and macroeconomic environment. As for the group lending, the existing system of group lending in China's commercial banks has been analyzed. And the similarities has been summarized to indicating the impact the systems made on credit risk prevention. Finally, with the example of farmers'group lending in China, the fact has been illustrated that group lending can ease the high credit risk appeared in farmer loans and solve the fund problems in agricultural industrialization.In the end of this paper, the writer applied the network organization to the process of lending decisions. Some suggestion has been proposed to make improvement from three aspects:design of credit products, the investigation before loans and post-loan management.