Study On The Impact Of Rural Finance Development Of The Poverty-stricken Areas On Farmers’ Welfare

Since the reform and opening up, the rural economy of Poverty-stricken areas has been greatly changed, and farmers’ welfare effectively improved. However, there is huge room for improvement in farmers’ welfare from the view of regional disparities or urban-rural gap. In 2010, the Chinese government put forward the concept of "Inclusive growth", the basic connotation of the concept is equitable growth and the goal is to allow more general population to enjoy the results of economic growth, achieve the sustainable development of China’s economy.The perfect rural financial system is conducive to narrow the gap between rich and poor, reduce rural poverty, enhance peasants benefits and promote the development of the national economy harmony and healthy. Lack of credit funds because of financial repression lead to a wide range of negative effects on farmers’ welfare. Since from 2004, nine consecutive years, the theme of the Document NO.1 of the Central Government is about "issues concerning agriculture, countryside and farmers", all the Document NO.1 of the Central Government stressed the status and role of rural finance in solving the problem of agriculture, countryside and farmers. The government proposed to improve the quality and level of financial services in rural areas, accelerate the pace of reform of rural financial system. So, how to play a positive role in rural finance in order to improve farmers’ welfare, this article make a useful attempt for exploring a new path of inclusive growth in China.Based on the macroeconomic data and 26 villages,520 farmers microeconomic survey data of the four state-level poverty-stricken counties in Sichuan and Chongqing, the core of this paper is to analyze four aspects of the influence mechanism that the development of rural financial impact on farmers welfare.Firstly, this paper analyzes the evolution and development of the rural financial and farmers welfare in poverty-stricken areas. From a macro point of view, the scale of rural financial development fluctuated and the overall trend is generally upward. The efficiency of rural financial development increased year by year before the mid 90’s of last century, but after that, the efficiency of rural financial development declined. The trend of the structure of rural financial development is as same as the efficiency of rural financial, Trends all are first up and then down. Judging from the farmers’ welfare, the income, consumption and net assets of household are not only lower than urban residents, and also lower than the average of the National Rural residents, the trend of Urban-rural gap and regional Gap further exacerbated. Non-agricultural income grew faster than agricultural income, the structure of household consumption and net assets changed greatly also.Secondly, study the impact of rural finance development of the Poverty-stricken Areas on farmers’ income. Based on panel data in sample area, rural finance is divided into four indicators:the scale of rural financial, the efficiency of rural financial, the structure of rural financial and the density of rural financial. We analyze the impact of each variable on the income of household. Research result shows that there is panel co-integration between non-agricultural income and rural financial development and there is panel co-integration between agricultural income and rural financial development also. But the effect of Rural Finance on non-agricultural income and agricultural income is different. The scale and efficiency of rural financial all have positive impact on non-agricultural income, but the impacts on the agricultural income are significantly smaller. Non farm income effect of the density of rural financial is more significant than agricultural income effect. Effect of Rural Finance on non-agricultural income and agricultural income are completely opposite. After adding the control variables, there is no change in the direction of each rural financial variable impact on agricultural income and non-farm income.Thirdly, study the impact of rural finance development and liquidity constraintsof the Poverty-stricken Areas on farmers’ consumption. There is a stable long-term cointegration relationship between per capita income, rural financial development and rural per capita consumption. Farmers per capita income is the principal factor affect farmers’ consumption expenditure. In all the variables of the rural finance development, the scale of rural financial, the efficiency of rural financial and the density of rural financial significantly affect farmers’ consumption expenditure, but the influence in turn reduced, but the structure of rural financial has little effect on farmers’ consumption expenditure. The scale of rural financial, the efficiency and the density of rural financial impact on farmers’ consumption expenditure by long-term sustained effect, rural financial structure has little effect on farmers’ consumption expenditure, mainly reflected in short-term effects, almost no effect on the long term. Using traditional λ model study found that liquidity constraints are serious in poor areas. The improved liquidity constraints model showed that liquidity constraints well explain the excessive sensitivity of consumption. There was no significant relationship between uncertainty and consumption. Decline in interest rates and launching of the consumer credit business don’t promote the increase of farmers consumption.Fourthly, analyze the the welfare loss effect of rural credit constraints in Poverty-stricken Areas. Credit constraint is a common phenomenoncommon in Poverty-stricken areas. Arable land, education and health care spending, whether there is a domestic emergency, family size, the number of elderly and children, all these factors are positively correlated with the farmers’ credit demand. Balance of financial assets and household income are negative correlated with the farmers’ credit demand. The remaining variables had no significant effect on credit demand. The value of fixed assets for production, arable land, the number of family labor, professional skills, net household income, net operating income, whether it is the village leader or friends of the leaders, whether it is the number of mutual guarantee team, the average income of the villagers and the village total population, all these factors have a positive impact on the supply of funds, the number of elderly and children have a significant negative impact on the supply of funds, and the other variables on the supply of funds are ambiguous. Especially, if farmers have more social capital, the probability is lower by credit constraints. Credit constraints lead to the loss of farmers’ welfare and the loss effects of consumption is the largest. The loss of agricultural income is greater than the non-agricultural income. Because of the universality of credit constraints, welfare losses were transferred between friends.