Research On The Allocation Efficiency Of Rural Formal Financial Market In Western Regions

The problems of agriculture, rural areas and farmers have become the pivotal barriers in restricting the harmonious development of economic and society. The key approach to solve the mentioned problems is financing and capital. In recent years, more than one “Number on file “emphasize to strength service ability of rural finance. However, the total resource supply of rural finance is less than total demand in China, failing to achieve the equilibrium. The demand of rural finance is not satisfied, particularly in the undeveloped regions in western of China, charactering with multi-level, difference and diversity. Since 2006, China Banking Regulatory Commission has begun to adjust and relax the control policies in terms of establishing rural financial institutions in rural regions. The supply situation of rural financial market has changed in western area. The policy reform still contributes to the changes of the original state of the disequilibrium of supply and demand. We can put forward the following questions: what about the efficiency of supply and demand bodies in the rural formal financial market? What about the allocation efficiency of rural financial market? How to improve the allocation efficiency of western rural financial market? These questions have become the main research issues of this thesis.Based on reviewing the literature related to rural financial market and allocation efficiency at home and abroad, and applying finance development theory and rural financial market theory, the author studies the allocation efficiency of rural formal financial market in western regions combining qualitative and quantitative methods. First of all, the theory analysis framework is designed targeting to provide the theoretical foundation through summarizing existed previous research and expounding related theories. Secondly, the thesis analyzes the operation efficiency of financial institutions and the efficiency of agricultural credit supply from the perspective of supply bodies in the rural financial market. From the aspect of demand subjects, the project quantitatively evaluates the availability of financing and utilizing ratio. Then, the evaluation index system of allocation efficiency is constructed,and the rural financial market allocation efficiency level and the influencing factors areinvestigated in the western areas. In addition, the internal root causes and the formation mechanism are explored in view of lower allocation efficiency of rural financial market.Finally, the overall schemes are put forward to enhance financial market allocation efficiency in western regions, as well as the corresponding policies, suggestions and countermeasures.According to the above research logic and relationships, the main conclusions are summarized as following:(1) The operational efficiency of supplying bodies of rural formal financial market is relative low in western regions. Only the total factor productivity(TFP) of China Agricultural Development Bank, functioned as rural policy financial institutions, shows an increasing trend and technology progress is the main driving force. While, the Agricultural Bank of China, one of the commercial financial institutions, has double restrictions, i.e. technology retrogression and lower efficiency. The declining TFP of rural cooperative financial institutions and small loan companies is mainly due to the setback of technology progress rate.At the same time, the technology efficiency and scale efficiency of agricultural credit supply represent a declining trend in western regions. The comprehensive efficiencies in most provinces reach the efficiency, but there exist large differences inter-provinces. Agricultural credit efficiency not only shows the horizontal differences across provinces, but also reveals the vertical discrepancy of value changes over time. In addition, the significant in the configuration of various influencing factors display opposite characteristics in the large valid and invalid regions in respect to the overall aspects of western regions. The contributors include rural financial development scale, rural financial market transaction efficiency index,the income ratio between rural and urban residents, and education level per capita which have significant effects on supply efficiency of agricultural credit.(2) In terms of financing availability from the perspective of demand subjects in rural formal financial market, 73.81% of the farmers get the loan after application calculated from the sample. 41.97% households get full specified amount loan. The factors, including education level, farmers’ cultivated land area, solving the actual problems, understanding loan policies and the reputation of financial institutions have positive effects on famers’ financing availability. As for the financing availability of small and medium-sized enterprises, 92.38%of the samples get the loan after applying to the financial institutions 62.86% of enterprises gain the full loan. Operational duration of the enterprise, credit rating, contacting frequency with financial institutions and the ratio of fixed assets have positive significant effects on financing availability of enterprises. However, the education levels of workers and understanding degree of loan policies have significant negative effects. According to the financing funding use ratio analysis of demand bodies, the empirical results indicate that theuse ratio of financing funds reveal increasing trend for the households, whose overall average efficiency value rises from 0.887 to 0.904 between 2009 and 2012. However, the rural small and medium-sized enterprise funds utilization rates show a downward trend year by year,whose total average efficiency value drops from 0.741 in 2009 to 0.730 in 2012.(3) Based on the deepening degree of the financial system, competition degree of financial industry, the openness of financial market and operating efficiency of financial sector, the rural formal financial market allocation efficiency evaluation index system is constructed. The analysis results suggest that the allocation efficiency of rural financial market is low in western regions, and the regional differences exist obviously. Only the allocation efficiencies of four provinces, such as Chongqing, Guizhou, Yunnan and Ningxia,are above the overall average, and the rest provinces’ allocation efficiencies are below the total average level. But the collocation efficiency within the sample period indicates an increasing trend. Though examining the changing trends of each factor which influences the rural financial market allocation efficiency level, the results reveal that total supply scale of rural finance shows obvious upward trend and the openness degree of rural finance market is enhanced gradually. However, the organizational structure configuration level drops and the regional characteristics exist in terms of the conversion from saving to investment. In addition,based on the empirical test, the factors, such as economic development degree and the role of financial in supporting agriculture, have positive effects on allocation efficiency of rural financial market. The fiscal pressure of the government has negative effect, and the structure of agriculture industry and population intensity in rural area has on significant effect.(4) The rural finance market in western regions could not reach the efficient state in terms of supply, demand and the overall market level. Thus, the allocation inefficiency problem exists. The root internal causes include technology level influencing operational efficiency of finance institutions, transaction cost restricting supply scale of agricultural credit,weaker agricultural quality hindering the financing availability of demand subjects, staff vocational differentiation of small and medium-sized enterprise restricting utilization ratio of funds, rural financial market segmentation leading to lack of competition, government interventions affecting rural financial market allocation and the outflow of rural capital hindering rural economic development. Meanwhile, the formation mechanism of lower allocation efficiency of rural financial market is investigated from supply, demand and coordination mechanism based on the choice behaviors of supply and demand subjects. The overall improving solution for rural finance market allocation efficiency is put forward emphasizing both supply and demand.(5) According to the problems exist from demand and supply perspectives and the causesof lower inefficient market allocation, the thesis points out that the government should optimize policy support system, increase the effort to support agriculture, perfect rural financial supervision system and improve agricultural supporting institution in order to promoting rural financial market resource allocation efficiency in western regions. Meanwhile,the government is required to enhance the construction of market competition mechanism,improve and perfect financial market structure, speed up the technology progress of financial management, encourage rural financial innovation, reinforce financial service in rural areas existing weaker services and optimize the allocation of financial resources to enhance the resource allocation efficiency of rural financial market. The final series of suggestions include speeding up the development of rural economy, improving the infrastructure of rural finance,increasing government support in agricultural support, strength effective government intervention, strengthening the integrity of the incentive and restraint mechanisms, and creating favourable credibility environment in rural areas to improve rural financial ecological environment.