Research On Rural Financial Linkage Mode In China

Farmers financing difficulty is a common phenomenon in rural areas, which is an important factor of restricting the development of rural economy in China. The main reason of farmers financing difficulties as follows: firstly, individual farmer’s financing amount is small, the financial institutions is difficult to form a scale effect, which leading to a high operation cost; secondly, the asymmetric information in rural market lead to adverse selection, moral hazard, high audit cost and limited execution cost, resulting failure in the rural credit market; thirdly, due to the defects of property rights, the legal system is not perfect, etc, farmers lack of the collaterals which banks will accept, unable to solve the problem of rural credit market failure by providing a variety of collaterals; fourthly, most credit capital flows to non productive areas, and agriculture capital is difficult to enter the field of agriculture for the reason of the idiosyncratic risk. Among these, information constraint and mortgage constraint is the key to solve the problem of farmers’ financing.Therefore, under the conditions of information constraints and mortgage constraints, how to establish a feasible credit management mechanism and debt compliance mechanism to prevent opportunistic behavior, reducing the credit risk of rural financial market is a breakthrough to solve the problem of farmers’ financing. From the successful experience of foreign countries and domestic practice, financial linkage is an effective way to solve the above problems, the financial linkage through the strategic cooperation between formal financial institutions and non financial institutions to expand the financial services in rural areas. The non financial institutions are the local organizations which are often deal with the local farmers, with the help of local organizations to scale farmers’ financial needs, and reduce the transaction cost of financial institutions; Using the local information of local organization, can effectively solve the farmers’ information asymmetry; through the financial linkage based on the agricultural industrialization, can guarantee the funds flowing to the agricultural production areas, with the help of the core linkage agency to enhance the credit of the farmers, finally,extend credit services to farmers.On the basis of research results of domestic and foreign, this paper analyzes the key problems of solving the farmers’ financing problem from the perspective of theory and practice:First, how does the credit mechanism of financial linkage be formed in the theory? Can financial linkage ease the information asymmetry in the rural financial markets? Can financial linkage alleviate farmers’ lack of effective collateral problems? Can financial linkage break through the traditional credit mode, and then expand the credit service to farmers?Second, what are the feasible patterns of rural financial linkage in practice? What is the specific operating mechanism? How is the effect of financial linkage? Under current legal system and credit system, how to carry out the compliance mechanism to control credit risk effectively?To solve the above problems, analyzing the financial linkage mechanism, financial linkage mode, and the stability of financial linkage mode, to establish a theoretical analysis framework of the paper; then analyzing the rural financial linkage participants, financial linkage effect and the financial linkage risk, finally come to the following conclusions:First, the rural financial linkage provides a new way to solve the dilemma of rural financing in the premise of ensuring the financial sustainability of the formal financial institution; a more feasible rural financial linkage mode is based on the agriculture industrial basis in the current, which is called bundled credit financial linkage. In bundled credit financial linkage mode, with the help of close contact with the borrower’s daily life and production process, facilitating the implementation of peer monitoring; Bank can realize low cost supervision of rural intermediary by controlling the transaction information, the flow of funds of agricultural products, solving the problem of information asymmetry; To increase the farmers’ expected income through the implementation of industrial projects, promoting the innovation of mortgage guarantee mechanism, to realize the alternative collateral; The group lending model increases the farmers’ guaranteed income, and the social capital is converted to alternative collateral, reducing the risk of bank credit management.Second, the formation of bundled credit financial linkage mode is closely related to the following factors: profitability of agricultural production project, rural intermediary business scale, the heterogeneity of agricultural product, cooperative relations among rural intermediary and farmers, government support. There are positive relationships between factors mentioned above and financial linkage mode.Third, there are two main types of rural financial linkage in China at present, which are generally based on the agricultural economy developed regions and underdeveloped areas. For agricultural economy developed regions, mainly focus on the related subjects in agriculture supply chain, with the power of market and government to promote the formation of financial linkages; for underdeveloped areas are mainly rely on the strengthen of government to form the financial linkage.The two types of linkage mode are relying on agricultural production projects, focusing on the improvement of farmers’ ability to repay, especially for poor farmers, scarce credit funds can be transferred to the poor farmers, and protect scarce credit funds transferred to poor farmers, and promote the transformation of poor farmers themselves, aim to the core issues of poverty alleviation system.Fourth, it should take full account of the farmers’ individual characteristics and family characteristics for improving financial linkage behavior and effect, and enhance the farmers’ recognition of the service function of linkage agency. Because of the empirical research on the linkage mode of cooperatives as the linkage agency, the empirical research shows that: variables such as age, education of farmers have significantly positive influence on farmers’ linkage behavior, while farmers’ evaluation of formal financial institutions has negative influence on farmers’ linkage behavior; there is a positive relation between farmers’ planting area, agricultural income proportion, social capital,the evaluation of the cooperatives with linkage behavior,financial linkage effect; Farmers’ approval of cooperatives service function is the key to financial linkage’s success.Fifth,Financial linkage based on the industrial cooperation can effectively reduce the risk of agricultural credit. Specific performance as follows: the industrial development of the agricultural reduces the unique agricultural industry’s production risk and market risk; Credit management mechanism such as credit access to farmers and core linkage agency, credit union and so on, which are effective for screening before lending; with the real transaction and mortgage innovation mechanism, a good debt compliance mechanism can be formed; Banks can effectively reduce the operational risk of financial linkage through controlling funds flow and real property pledge risk, and strengthening the construction of information platform.Sixth,the government’s leading role is the fundamental guarantee of the rural financial linkage. When agricultural industrialization develops to a new stage, the unique agricultural risk and profitability problems become more apparent, for the rural financial linkage relying on the development of agricultural industrialization is hard to deal with only by the government or farmers. Starting from the weakness of agriculture and the functions of the government, On the one hand, the government should establish a good external environment for financial linkage in terms of policy support and system construction; On the other hand to strengthen the necessary financial investment to lay the material foundation for the risk management of agricultural credit funds, fiscal funds should flow to financial linkage with interest subsidies, guarantee subsidy, premium subsidy etc, government should share all kinds of risks in financial linkage with farmers, financial institutions.