Research On The Restructuring Of Rural Financial Organization System From Functional Perspective

Good system arrangement can alleviate the polarization problem,at least not make it worse. In this sense, functional perspective ruralfinancial organization systems can be treated not only as a technical issueaddressing rural financial resources scarcity, but a humanitarian care onthe value level. In fact, it can also be seen as a system of innovationneeded to build the new socialist rural areas.The paper makes "Why does China need a rural financial organiza-tion system" as a theoretical basis. That is, to treat the rural financialinstitutions as a composition of long-term contractual relations system toreplace short-term market exchange relations. The grounding reason isthat the contractual relationship with its adaptability, efficiency, stabilityand policy to the rural financial institutions, can give much more benefitsto farmers than pure market relations.On this basis, this paper sorts out the historic changes to Chineserural finance organizational system and finds that it develops in a verytypical institutional path, and that it is almost around the adjustments tothe rural financial institutions.Therefore, Chinese rural financial system design has the problem oftrails dependence, leading to the long existing inefficient equilibrium ofthe rural financial system. However, inefficient or little efficient as suchan equilibrium is, the cost of abandoning it is very high, which explainsits long existence, an existence which can't produce institutional changesof Pareto perfection. We think that only by restructuring this ruralfinancial system from functional method, can we improve the operationalefficiency of the entire rural financial system.Then, the paper studies the historical changes and the status quo ofthe rural financial organization system in developed and developingcountries and Chinese Taiwan Province by comparative analysis. Although we failed to find a "generic" or "panacea" rural financialorganization system, we can find some common or representative thingsto service us restructuring the rural financial institution system.In the next chapter, the paper establishes a general model toanalyzethe rural financial organization system in a comparative basis,and uses a functional sociological approach to establish a general analysissystem and a research framework for the rural financial institution systemanalysis. Furthermore, the paper establishes level analysis models toanalyze the rural financial organization system, and concludes that therural financial organization system has the four functional characteristicsof adaptability, efficiency, stability and policies. On that basis, the paperresearches on the shortcomings of Chinese rural financial organizationsystem, which is linked with previous rural financial reform andinstitutional perspective.According to the financial function theory, in the rural financialorganization system, no single agency can meet farmer's various forms offinancial needs. But in the course of studying on rural financialproblems, people often assume there should be a perfect form oforganization. The analysis from functional perspective goes out of the"agency perspective" assumption. The paper gives a conclusion on thefunctional relationship between the rural financial organization systemand environment from a functional perspective, and summarizes the ruralfinancial organization system should be available in functional andconceptual framework.Therefore, the key point to operate the rural financial organizationsystem efficiently lies in the establishment of a property rightsinstitution, micro-organization design and operational model to adapt tothe external environment.Then, through the analysis of the game between rural financialinstitutions and farmers loan process, we found even in the absence ofcentral government and local govemments, the restructuring of the rural financial organization system will bring a cost-benefits weighingbetween different parties in the game, whatever it may perform. The ruralfinancial institutions and rural households, who are closely related torural financial transaction costs, are the main beneficiaries of thereduction of financial transaction costs. Therefore, they should become animportant force for restructuring of rural financial organizationsystem. To ensure a successful restructuring of the rural financialorganization system in functional perspective, the rural formal financialsystem must be innovated, the management system be rebuilded, andpolicy guide for rural informal finance and norms of behavior beprovided.In order to ensure the orderly operation of Chinese rural financeand let finance fully play its important role in the rural economy andsocial development, we need "a visible hand" to intervene in the ruralfinance. So the rural financial regulation is necessary.However, the former changes of Chinese rural financial regulationis based on the institutional perspective. We need a functional perspectivebased innovation on rural financial regulation institution, an innovationon the rural financial regulation notion, on supervision model, onregulation method and on internal control system, all based onlegalization.