Lender relies on family credentials to minimize nonperforming loans

The most common reasons for small business owners failing to repay loans on time are moral hazard such as gambling, unsalable products due to market changes, and acting as guarantor for a friend or relative's now overdue loan, said Mu Yuehong, client manager at Bank of Taizhou Co Ltd.

Mu, 41, joined Bank of Taizhou, a city commercial bank that specializes in making loans to micro and small enterprises, in 2003. She now manages about 280 clients, most of whom are self-employed entrepreneurs.

To prevent the occurrence of nonperforming loans, she tries to learn as much as possible about small business owners' family relationships, their business operation history, the accumulation of capital, the real purpose of the loan, and the total value of guarantees they have provided for other loans.