| Small and micro-enterprises (SMEs) have been playing a very important role inChina’s economy, but the financing for SMEs has long time been a big restriction fortheir development.In the paper, Tailong bank’s relationship lending practice was first analyzed, theanalysis focused on how microfinance institutions took advantage of simple structurecompared with big companies, and how they tried to build a community basedinstitutions, and whether they can solve the information asymmetry problem, which isthe biggest obstacle for SMEs’ financing.As credit risk control is one of the most important issues for financial institutions,so in the empirical part, the paper analyzed whether the risk control method in Tailongbank-Credit Scoring can work for relationship lending, based on large amount firsthand data of the real default loan database. The result showed that the credit scoringsystem can partially predicted the default probability of loans, which means that thecredit scoring can at least work at some certain level.Based on my research, the author suggests that Microfinance Institutions (MFIs)should develop relationship lending business, and based on that, they should build anddevelop a quantified credit scoring system, which could effectively control the risk ofmicro loans. |
