Study On The Micro-credit Institutional Supervision Systems In The View Of Finance Justice

There is a worldwide puzzle for the commercial finance to serve the intensive scattered small and micro enterprises(SMEs) which is pursuing for profit maximization in the market. Meanwhile, SMEs have been challenged with unprecedented financial exclusion during financial globalization and deepening process. Chinese scholars have reached such a consensus due to “dual financial system upon urban-rural dual system” as of this headache. However, this viewpoint seems could not hold tight, since under the circumstance of completion of state-owned enterprises and commercial bank's marketization from 2004, fundamental changes has undergone in the urban-rural relation, in particular, a new paradigm “industry for agriculture in return, the city for the country ” has gradually been on debut. A further argument could be sought as follows: financial system shows supporting SMEs in resource allocation in the transformation from “hand for grabbing” to “hand to give”. In one word, the aforesaid dual financial theory could not well explain financial exclusion properly. Therefore it is a necessity to seek for the reason from another perspective.In China, multi-tier micro-credit market has tentatively and gradually established in light of financial market opening-up policy, based upon which SMEs' financial exclusion tension has also be softened. However, the Supervision system has come up with more and more deficiencies:there is still big gap between current Supervision mode and the Supervision governance requirement; the dismatch between Supervision target value and the current micro-Credit institutions supervision in setting and monitoring value goal; ignorance of the practical needs which the inclusive Supervision call for caused by the Quasi prudent and prudent Supervision mode. In a certain extent,the Quasi prudent and prudent Supervision mode even exacerbated the financial exclusion formation, and leads to a higher cost of Supervision.Different micro-Credit institution in different nations holds different ideas and rules. Actually there is no panacea to address this problem. In contrast, policies of micro-Credit institution in other foreign jurisdictions such as United States or South African particularly a classification Supervision approach via laws-making, are supposed to be referred to by China. Micro-Credit institution Supervision system are requested to be revised from concepts to systems, if micro-Credit institution plays a role as a channel for private capital, and our country opens up financial market to improve financial service.This study explores micro-Credit institution Supervision issues under the view of finance justice. After an analysis of China's micro-Credit institution Supervisory rules as time being, a discussion of its status quo, and an exploitation of the causes of its “mission deviation”, a multitude of suggestions has been advised aiming at its revolution with a comparison home and abroad in this regard. Thereupon it can be divided into five chapters accordingly as follows.Chapter 1, presenting a theoretical base, from the objects of micro-Credit institution Supervisory revolution, analyze Fair Finance's concept, theoretical base and realizing approach aiming at providing a theory base for the Supervisory revolution in the later parts thereof.The idea of Finance justice has come up closely with financial Inclusion. The idea of financial inclusion, sprung from international micro-credit year 2005, has becoming popular due to the fact that traditional finance's disability of respond to modern finance development. What financial inclusion emphasizes that financial service's availability, i.e. the equality of access to financial service, which means finance shall provide service to all individuals. The essence of finance justice, which means a fair value of economic law, contains fairness in form and in content, a choice available for micro-Credit institution. The value of finance justice proposed not only has theoretical basis for financial ethics and the philosophy of law, in practice it be realized through the conversion of thinking pattern of traditional financial Supervision law.Traditional financial Supervision is typical of a “Supervision-centered” paradigm, an emphasis on financial safety and development but negligence on financial efficiency and justice. In the development of reform process of financial Supervision, the idea of governance has becoming consistent with financial Supervision, and contributes to the transformation of financial Supervision. As far as micro-credit institution concerned, the management approach of private sector shall be introduced, and shall play a less and less compulsory role in financial Supervision. The significance of financial Supervision is to define the behavior of the Supervisions. Supervisions shall make good Supervision rules to reach a participatory Supervision object.Chapter 2 Analyze the status of the legal Supervision of micro- credit institutions, introduces the deficiency in financial systematic arrangement of China's current micro-Credit institution with a positive approach of micro-Credit institution' Supervision performance. It also provides the micro-Credit institution' Supervisory revolution in ideas and improvement of Supervision with a legal reason in practice.In the first instance, micro-Credit institution' Supervision power is not in line with its values and objects. China Banking Supervision Commission(CBRC) and Central Bank, as the most important organ in micro-credit Supervision, comply with different views on Supervisory reform with conflicting values. CBRC is preferred to reform on the stock reform to keep the risk at bay, while Central Bank to reform on the incremental reform to encourage competition via private capital. It appears the two organ's conflicting view and principles lead to a contradiction of policy making and execution, also an obstacle to new micro-Credit institution development. In the second instance, the Supervision paradigm is conflicting with Supervision value and objects of fair finance. Not only depositing or non-deposited micro-Credit institution, Supervisions carry out prudential or quasi-prudential Supervision, taking different classification into no consideration. Deposit micro-Credit institution Supervision targets at two improper Supervision acts: on one hand, as for middle and small banks, emphasize too much encouraging policy without realizing risk management. It may become a channel for financial risk to pull over across sections, and also become high-risky; on the other hand, as for rural banks in the form of new deposited micro-Credit institution, are adopted by prudential Supervision mode which is resulting in serious mismatch between the purpose of the establishment of rural banks and Supervision mode. The uniform Supervision rules contribute a disadvantage when rural banks competing in SM financial market; therefore they have to resort to giant enterprises as potential customers, with a result that their business mainly covers urban areas. As for non-deposited micro-Credit institution, quasi-prudential Supervision is not in line with cost-effect Supervision principle. Its Supervision gravity shall focus on borrower protection, interest rate policy etc. But nevertheless prevention from the systematic risks.Chapter 3 is centered on an evolution of micro-Credit institution Supervisory ideas as well as its argument of its reasonableness, set up a logic basement for Chapter 4 and 5. Financial safety and efficiency is the value that the traditional finance is pursuing for. However, in the Supervision process, over-emphasizing “Supervision” or closing an eye on freedom and efficiency resulting to loss of fairness is a fact that shall be set up new ideas: inclusive Supervision ideas. What inclusive Supervision emphasizes is cooperative, flexible according to different situation, as it is characterized with both public and private law. The method of cooperative Supervision, which is always typical of cost-effective principle, remains to help resolve information asymmetry and burden of Supervision cost. The diversification of micro-Credit institution calls for “multi”, which makes Supervision allocation a new project. Differentiated Supervision, a way to realize fair finance, is to revise and simplify some rules whose characteristics are not suitable with depositing micro-Credit institution, and a step further to be identified from general commercial banks under unified prudential Supervision principles in banking industry. Furthermore, differentiated Supervision aims at high sensitivity and transparency with special micro-finance risks from micro-Credit institution's viewpoint.Chapter 4 discusses Supervision allocation of micro-Credit institution. The allocation of financial Supervision comprises relative power allocation, execution as well as the interrelations between Supervision organs. It also presents two opposite aspects, i.e. horizontal allocation in function and vertical allocation in structure. In micro-Credit institution Supervision, horizontal functional allocation can be produced into two issues, this is, the Supervision coordination between central bank and CBRC, and the unification of multi-subject Supervisory organs in local level. Vertical structural allocation refers to division of Supervision power in vertical level. It tries to address such an issue arising from vertical allocation of Supervision power in micro-Credit institution, i.e. Between central and local governments in financial Supervision, As time being, financial Supervisory power vertically appears high-centered in national government, while intensively weak in local level. Local financial commissions is mainly in charge of supervising non-deposited micro-Credit institution in replacement of current CBRC-dominated models. As far as allocating horizontal Supervision power of deposited micro-Credit institution concerned, central bank dominated model is preferred to current CBRC dominated model for the purpose of realizing micro-Credit institution's Supervision objects.Chapter 5 centers on micro-Credit institution classification Supervisory system and also gives some comments accordingly. Taking the fragility of small and micro financial market into consideration, standard Supervision provided under centralization of power is not able to adapt to such a market with its own characteristics. In contrast, classified Supervision system provides professional and specialized service available for every Supervision judge. Prudential Supervision is referred to deposited micro-Credit institution while non prudential Supervision to non-deposited micro-Credit institution. Deposited micro-Credit institutions are quite different with giant and middle financial institution for the sake of low systematic risk. Therefore risk management is mainly targeted at individual risk. Although after U.S.sub-prime crisis there is a global tendency to emphasize macro prudential Supervision, it makes no difference to micro-Credit institution. Instead a relative favorable Supervision environment is accessible, i.e. those institutions can be hardly effected by Supervision upgrading, and a cushion for their business transaction is also available. Deposited micro-Credit institution was born for the purpose of community bank. However it has been deviated from its start-up. Therefore Supervisory system shall be revised to make deposited micro-Credit institution community bank-oriented to play a community bank role. Non deposited micro-Credit institution, targeting at non prudential Supervision, includes market access, borrower protection as well as interest rate policy revisiting. As to the non deposited micro-credit institutions, the current registration plus approval system is too harsh, it can be improved in following aspects: Firstly, the quota amount should be canceled; Secondly, non deposited micro-credit institution should implement a dynamic hierarchical standards to decide whether the non deposited micro-credit institution need register; Thirdly, non deposited micro-credit institution can take a variety of organizational forms such as partnership, association, natural persons etc., instead of confined to company. Construction of protection system of the borrower the interests mainly include the following three aspects: standard lending agreement; Prohibition of excessive lending; loan limit illegal behavior. Although the interest rate control questioned, but most of the countries or regions are still implement the interest rate control on the non deposited micro-credit institutions, China is no exception. For deposited micro-credit institution, although adopting the private lending interest rate control model is practical but too simple. Classification regulation combined multiple criteria is the evolution of the system of interest rate control direction.