Study On Development Of Rural Informal Finance

The dissertation is focused on rural informal finance in China. Under the guideline of modern contract theory and financial intermediary theory, combining with the analysis on investigation data, the paper makes a positive study on micro causes and influences of emergency of rural informal finance in conversion period of China. By applying institution evolution theory, the paper probes into the possible development patterns and requirements of this issue. After analyzing the factors which restrict its development, some suggestions are put forward.1. Main Contents:This dissertation is concerning about how to induce and develop the research on rural informal finance. The main contents consist of eight facts as follow: the first, targeting destination and objects of this research, and making sure of the theories and basic category; the second, doing research in positivism to investigate the primary profile of this issue in home and abroad, especially for the informal financial activities and its characteristics under Chinese economic transformation; the third, analyzing its causes on the transformation period; the fourth, exposing the existing problems and its causes; the fifth, analyzing its developmental effects with positivism; the sixth, clarifying possible path and condition on its way of development; the seventh, finding out the basic principles and channels on how to induce and standard this question; the eighth, proposing some relevant policy suggestion.2. Main Conclusions:(1) Rural informal finance has existed for a long time and is common in China. Compared with other countries in the world, it has a long history for thousands of years in China. Informal credit was dominant in rural place during the time of feudal society, and this situation had lasted even when socialism institution established. After reform and opening up of China, the activities of rural informal finance expanded gradually, together with the financing scale increasing, financing instruments complicating and the influence on society being great.(2) During conversion period of China, rural society and rural economy developed imbalanced, this determined a great diversity of financial transaction modes. Meanwhile, the defects of system of rural formal finance of present time provide the developing space for rural informal finance. The diversities and alterations of rural economic structure, organization patterns and operation mechanism objectively require rural financial operation, patterns and structure make corresponding gearing and alteration. But government-controlled finance can not meet such requirement. Formal financial institution in rural place was developed actually as financing method for government branch. Fanners and medium-small enterprises in rural place can not get efficient financial services, and have to turn to rural informal finance to solve their financing problem.(3) Compared to rural formal finance, rural informal finance has advantages such as reducing financing cost, taking full use of information and gearing to its social economic environment. Formal financial institution in rural place has sufficient capital for loan, but has no efficiency in getting information of creditor and supervising creditor, so, formal financial institution use not price variable but loan quota method to resolve problem of scarcity of rural capital supply. On the contrary, with diversified operation patterns, rural informal finance could solve such problem as adverse selection and moral risk in rural credit market, which is the key factor why rural informal finance could develop rapidly even it is prohibited by government all the times.(4) Because of system supply defect of rural informal finance, many aspects of it as credit patterns, operation activities and risk control may be irregular, which will unfavorably affect social economy. Firstly, due to its concealed operation feature, a great amount of capital including which of rural informal finance itself and reserve deposit of other formal organizations, flows out of formal financial system and is not under supervision by the monetary government. So this situation will inflict influence on money creation of formal finance, make it difficult to control money supply, and the effect of monetary policy will be reduced. Secondly, without financial service protection from formal institution, the operation risk could not be properly guided and controlled, and the financing function could not be exerted fully.(5) Rural informal finance contributes to solving financing problem of rural economic subjects to some extent, to altering competition situation of rural financial domain, and to cultivating rural financial markets.(6) The pattern and operation mechanism of rural informal finance correspond to developing level of society economy. The evolution of rural informal finance has different level in different developing stage. In its evolution process, innovation capability plays most important roll, but the influence of government performance can't be overseen. The basic causes of development of rural informal finance lies that rural subjects want to make profit, which can't be got in formal financial system. So the evolution of rural informal finance is the result of innovation of rural financial enterprisers. Only such innovation is not sufficient to ensure its development, public goods provided by local government are also needed in evolution of rural informal finance. Performance of government may influence or dominate evolution process according to the extent.3.Main Persperctives:(1) Because of its institution advantages on operation, rural informal finance contributes to solve financing difficulties of farmer, and make up to scarce of formal financial institution in rural place. So, probing into operation mechanism and rule of rural informal finance, may help to provide new ideal for reform of rural formal financial organizations, and to explore new financial methods for supporting agriculture, rural place and farmer;(2) From the causes of development point of view, the factors of its "healthy and strong" growth lies in that the rural informal financial system has orientated the characteristics and principles of peasant household's necessity. Institution design on the agricultural loan system, therefore, should pay more attention to regular activity pattern of micro individual, so that provide executable financial service.(3) The running of rural informal finance is confronted with many problems, if we can't solve which effectively, rural informal finance may bring much unfavorable influences on social economy;(4) Suitable policies are needed to assure regular operation and sustainable development of rural informal finance.4.Main Creativity:(1)Investigating the causes of rural informal finance in the period of Chinese economic transformation on practicing theories. On the basis of classics in financial intermediary theory and modern contract theories, and careless omission before the author, this investigation supposes that the causes of Chinese rural informal finance on the period of transformation is neither purely belong to the finance repression theory nor the out of order marketing theory,but the interact result of in and out, which means the outside reasons of marketing unequilibration and finance repression policy and the inside factors of advantage in informal finance information, which have been fully testified on the process of research.(2)The experimental perspective on how the village informal finance does not depend on gage but insures a payment safety. Experimental evidence verifies that the village non-regular finance can make use of its information advantage to issue a monitor loan; as a result it can insure the safety of the non-mortgage guarantee loan. This result adds the existing conclusion of the informal financial information superiority.(3)With the ruling of the policy design on the development of village informal finance, the way of developing the infomal financial and formal finance adjustment together are raises. Through this kind of adjustment of system strategy, making the informal finance and the formal finance keep good interaction, lowering the degree of information dissymmetry in agricultural loan market, satisfying the peasant household letter loan need, then promoting the development and the efficiency of the informal financial norm.