The Study On Coordinated Development Of Rural Financial Institutions Towards Agriculture, Farmers And Countryside

The Central Committee of Community Party and the State Council attach greatimportance to “Sannong”(agriculture, rural areas and farmers). The Central NumberOne files have emphasized “Sannong” issue for nine consecutive years since2004. Inthe fields of agriculture development, the growth of farmers’ income and new ruralconstruction, a series of policies have been introduced to strengthen the foundationalposition of agriculture, get on the way of agricultural modernization, establish thelong-term mechanism of promoting the development of agriculture with industry andbringing along the development of the countryside with cities, and form the newpattern of integration of urban and rural economy and society.Rural finance is the core of the rural economy. Since the reform and opening-up,China has reconstructed the financial system of the rural area, and the scale of ruralfinance has been expanding constantly, which has played an important role inpromoting the development of rural economy. However, the pace of reform of ruralfinance lags behind the continuously growing demand that rural economytransformation has for financial service. Some problems are still outstanding. Forexample, the absence of rural financial services still exists in some villages and towns;farmers are still generally facing varying degrees of credit constraint; the business ofpolicy-oriented finance is shrinking. meanwhile,cross-competition exists betweenpolicy-oriented finance and commercial finance; the lag of rural insurance is stillsevere. The characteristics of dual financial structure is obvious in China’s ruralfinancial market: the formal and the informal rural financial organization coexist. Theformal rural financial organization system has gone through the history of the ruralcooperative financial-based to the current cooperative finance, commercial financeand policy-oriented finance coexisting pattern. Now, three types of rural financialinstitutions support “Sannong” with high profile from the strategic level. For example,rural credit cooperatives and other cooperative financial institutions act as the mainforce in supporting “Sannong”; the Agriculture Bank of China still sets up “Sannong”business department after its reform; the Postal Savings Bank locates inserving“Sannong”. But three types of financial institutions lack the symbiotic powerwith poor communication and haven’t formed a cohesive force in serving “Sannong”.Based on the above background, this dissertation specifically aims at the research ofcoordinated development of financial institutions towards “Sannong”, which has thetheoretical and practical significance. Coordination is to achieve the best effect of system by making the function ofvarious parts of system in a cooperative and ordered state. The financial institutionstowards “Sannong” include rural-related banking institutions, insurance institutions,guarantee agencies and rental agencies, etc. Nowadays, banking institutions are in theleading position which include cooperative financial institutions such as all levels ofrural credit cooperatives, rural cooperative banks and other cooperative banks; theAgricultural Development Bank belonged to policy-oriented banks and commercialbanks such as rural commercial banks, Agricultural Bank of China, the citycommercial banks, the Postal Savings Bank and so on. Coordinated development ofChina’s rural finance is a benign cycle where rural policy-oriented finance,cooperative finance and commercial finance institutions interdepend each other, face“Sannong”, and pay attention to the effect of supporting “Sannong”. System theory,financial symbiosis theory, rural financial supply and demand theory and the theory ofdivision of labor provide the theoretic foundation for the coordination development ofthe financial institutions facing “Sannong”. The primary purpose of the coordinationof the financial institutions facing “Sannong” is to support agriculture effectively.The organic integration and synergetic order of different kinds of financialinstitutions can enhance the overall effect of financial rural-supporting system. Theinternal drive of coordination is the comparative advantage of different kinds of banksand the external power is the optimized financial ecological environment of rural area.What’s more, the method of coordination is the appropriate financial regulatorysystem and information feedback mechanism.Function is a beneficial effect and effectiveness of something. This dissertation isbased on the view of systematic structure and function, analyzing the feature of thefunction of financial institutions. Meanwhile, it inspects the practical function ofdifferent types of current financial institutions one by one. The function ofpolicy-oriented financial institutions shrinks from widely policy-oriented todevelopmental function of promoting“Sannong”. The traditional cooperativeinstitutions play main roles in rural credit,but their basic functions are not fullyrealized.Cooperative financial institutions such as mutual agency operate well, buttheir market share is small. The rural-supporting function of commercial financialinstitutions is different which can not ensure the net inflow of “Sannong" fund.Different kinds of financial institutions can’t function as an organic integration,making a complementary relationship among these institutions impossible.In order to analyze the coordination situation of rural finance insupporting“Sannong” in China synthetically, this dissertation, from the macro, mesoand micro three dimension, build the corresponding index to evaluate. From the macro aspect, this dissertation establishes rural finance related ratios to judge the overallcoordination situation between rural finance and rural economy; from the meso aspect,it sets the ratio of rural financial service coverage, the rural loan-deposit ratio, therural insurance penetration index to examine the rural financial supply and demandsituation; from the micro aspect, it sets quantitative indexes, including marketconcentration, ratio of loans to farmers, ratio of loans to agricultural enterprises,rural-related loans ratio to examine and analyze each subsystem of marketconcentration and related rural-related loans ratio respectively and further to explainrural coordination condition. After these indicators are constructed, firstly thecoordinating condition of rural financial institutions towards “Sannong” intuitively isanalyzed, according to the processing and analysis of datum from rural financial atlaspublished by CBRC for several consecutive years. Then the coordinating level of ruralfinancial institutions servicing for “Sannong” is measured concretely and calculatedfrom the interprovincial view.In order to deeply understand China’s rural financial coordinated developmentlevel, this dissertation has constructed some models and index system of thecoordinated development degree of rural financial institutions. Also the empiricalanalysis is conducted. The result demonstrates the coordination degree of financialinstitutions towards “Sannong” during the years2006-2010of different provinces(autonomous regions) in China. Cluster analysis suggests that the coordinateddevelopment degree can be classified as four categories. Most provinces belong to thesecond category and the number of provinces in the other three categories is rathersmall, which proves the conclusion that the higher coordinating level of the financialinstitutions towards “Sannong” of a province, the better the coordination of ruralfinance and economy.Based on the present situation of the insufficient coordinating development degreeof the financial institutions towards the “Sannong” and the experience of coordinateddevelopment of the financial institutions abroad, this dissertation finally puts forward thefollowing countermeasures: to optimize the financial ecological environment; to developthe functional complementary financial institutions; to establish regional financialco-ordination development mechanism, and so on.