Study On Rural Financial Institutions Based On Information Asymmetry

From the view of information economics, the core bottleneck currently hindering"agricultural production, farmers' income, and rural prosperity"is the financing difficulty for"Agriculture, Rural areas, Farmers", the cause of which lies in the information asymmetry. Information asymmetry induces opportunistic behaviors, which are the adverse selection and moral hazard. They are seriously hampering the development of China's rural financial market, and are the major obstacles of formal financial institutions accessing to the rural market. Therefore, introducing the theory of information asymmetry into the study on developing the rural financial institutions, not only has a strong theoretical significance, but also has practical significance for the promotion of rural financial system development and improvement.Based on the analysis of rural financial institutions, the article researches on the following areas:(1)Relative to the "binary" economy structure of urban and rural areas, this article uses the concept of the urban finance relative to the rural finance. From the financial activities of the rural financial market, the rural finance includes direct and indirect financial banking. On the other hand, from the rural financial system, different types of financial institutions, including the formal and informal finance, obtain information from different sources, thus affecting the efficiency of the financing. Information asymmetry is an important factor affecting the operational efficiency of financial markets. The paper points out that information asymmetry is the greatest difficultly for formal financial institutions withdraws from and accesses to the rural economy.(2)Studying the system of China's rural financial institutions reform process, this paper points out that the situation of"a cooperative supporting'Agriculture, Rural areas, Farmers'"because of prohibiting the rural cooperative foundations, large-scale commercial financial institutions from rural areas and a large number of rural capital's outflow from the rural economy. From a historical perspective, the strategy to address the "Agriculture, Rural areas, Farmers" difficulties in financing should be to build a diversifying rural financial organization system to meet the needs of all types of rural finance.(3)The farmers'financial needs depend on the comparison between their income and expenditure. By investigating the rural in North China Plain, it is found that the rural household income is greatly uncertain so that the farmer family credit demand is not fully effective, because of the information dissemination not smooth in the rural areas. The study about Hebei Province finds that the township enterprises are facing great difficulties in financing, and that information asymmetries and financial repression is the major cause, of which the former is the primary reason.(4)Learning from other scholars'studying ways, the narrow money (M1) is taken as a main reference to the main financial indicators, and the economic and financial relative proportions are calculated. We compare the financial supply, including the formal and informal financial institutions, with the demand. Then it is shown that China's rural financial market is still in short supply imbalance, and that the supply and demand gap is the further expansion trend as time goes. As adverse selection and moral hazard arising from the information asymmetry, there are different operational mechanisms at the two relatively isolated markets. Because of information superiority, the informal financial institutions distinguish the different types of the farmers when they loan, and they tend to choose the market-based farmers. Formal financial institutions also tend to loan to the market-based farmers, but they can not use interest rate to distinguish the different types of the farmers because of information asymmetry and the interest rate non-marketlization.(5)Through the study of the signal transmission model, from the financial standpoint, the information screening mechanism can be built as long as the signal transmission is turned the other way round, effectively reducing the adverse selection. Combining the incentive and monitoring mechanisms into the design of the credit contract at the same time will increase the dependence on the information, the farmers'getting the output share and monitoring signals are interrelated in the design of the credit contract. During the implementation course of the credit contract, the extent of the farmers'hard work has nothing to do with the credit loan obtained from the financial institutions, and then this can effectively reduce moral hazard.(6)In both developed and developing countries, from the experience of resolving successfully the financial difficulties of rural areas, their rural financial systems have a diversified characteristics, and most countries have divided into the rural financial policy, commercial, cooperation and micro-finance organizations. The diversification of rural financial institutions, credit channel diversification, is the main characteristics of the U.S. financial system in rural areas. Germany financial cooperation is the mainstay of rural finance. Japan's agricultural finance has a strong financial cooperation of the agricultural association system, and the government's financial policy, the two complement each other. India's rural financial system is typical of the developing countries'rural financial systems because it is a highly developed system. The micro-credit model of Grameen Bank is the main features of Bangladesh rural financial system.(7)The reform of China's rural financial system has to construct a diversifying rural financial system, and the reforming process should be guided by adaptive, efficiency and stability. From the financial supply point of view, Agricultural Development Bank should further expand the field of agriculture, and Agricultural Bank of China should adhere to the orientation of serving the agriculture, and the rural credit cooperatives should full play the main force role of serving "Agriculture, Rural areas, Farmers", and the Postal Savings Bank should actively expand the agricultural services, and the microcredit organizations should be developed vigorously in rural areas. From the financial demand point of view, the effectiveness of the farmers'credit needs should be enhanced, and the modern industrial system of agriculture should be established, and the agricultural investment return rate be increased, and the mode of economic growth be transformed in rural areas.The full paper altogether includes nine chapters, which are introduction, information asymmetry and rural finance institution theory, the inspection of the typical national rural finance institution patterns, our country Rural finance institution system questions which reforms are faced with, the analysis on the financial demand of"Agriculture, Rural areas, Farmers", the analysis on the un-equilibrium of the rural finance market, the design of information screening and surveillance mechanism, the countermeasure of our country rural finance institution multiplication development, research summary and forecast. The innovation points in this article are mainly manifested in the following aspects:(1)The reform of the rural financial system is a complex engineering concerneing the success or failure of the reform of the rural economic system, and information asymmetry is a general and vital issue in the rural financial market. From the perspective of information economics, using the asymmetric information theory, the article has analyzed systematically that the problems of adverse selection and moral hazard have been encountered during developing China's rural financial institutions, and found the development crux. In order to take precautions against adverse selection and moral hazard, the paper studies the signal transduction model and the best incentive and monitoring model. And it explores the establishment of the market information screening and monitoring mechanisms with a view to resolve the problem of information asymmetry. The entropy theory of information economics is applied when the article analyzes the uncertainty of the farmers'income. It is found that, the farmers'income will rise steadily if rural information is fluid, the entropy of the farmers'income level will be reduced.(2)China's "binary economies" structure of urban and rural areas has been shown, and this paper finds that the rural financial market is also divided into the part led by the formal financial institutions and the other part led by the non-formal financial institutions. In order to illustrate the long-term imbalance of the rural financial markets, this paper takes into account both the supply of the formal financial institutions and the supply of the informal ones when it analyzes the rural financial supply. And it has arrived at the relatively accurate gap of the demand.(3)Based on the proposing of the two concept, which are the diversification degree of the community types that are serviced by the rural finance institution and the compatibility of the rural finance institution to the rural finance demand, constructing a simple model, the paper illustrates that it is an inevitable choice to build a diversifying rural financial system to solve the financing issue of the "Agriculture, Rural areas, Farmers ".