A Study On Borrowing Behavior Of Rural Households From The Perspective Of Behavioral Economics

Since the reform and opening up, the Party central committee and the government has taken rural financial market development very seriously. During the third plenary session of the17th central committee of Chinese communist party, it pointed out more clearly that "the rural finance is the core of modern rural economy ". The actual development has also proven that a national or regional financial development level and the local economic development are closely related. The more developed is the financial market, the more efficient is the allocation of the market resource. The development level of the credit market is a excellent indicator for the development of the regional financial market. So study on the credit market is the basic and piloted prerequisite of the research on the national and regional financial market development. The study on the credit market is mainly based on borrowing behavior between the respective economic entities. Due to this, we could take the study on the household borrowing behavior as the basic study on the rural financial market, and this behavior has important meaning for the adjustment of the rural financial policy and the planning of the rural economic development.This paper exploits the newest research achievements and the cognitive biases, mental accounting, generalized hyperbolas, etc, and based on the demand of the rural households, to make comprehensive illustration on household borrowing behavior. Also, this paper proposes the corresponding advices and counterplans.This paper covers three mains aspects:(1) Distinct heuristic bias presented in borrowing behavior of rural households.Heuristic method, as an effective cognitive tool, has significant effect on world cognition. Due to the inherent defects of human brains, we can not use this tool with high effectiveness. As a decision example under uncertainty conditions credit decisions by rural hoseholds are prone to stuck into heuristic traps. Many rural households will overrated their abilites because of the cognitive bias on covariant and depreciation and the basic attribution bias, and for the purpose of self-protection motivation. The will make credit decisions aimlessly based on their underestimations on loan risks, resulting in failures in operations and leading the families into troubles.(2) Affected by the mental accounting, the use of the loan money and the source of the loan influence each other. The mental accounting theory assumes that the equivalent currency from different source and for different uses has different utility on rural households. Based on this theory, the loan for different uses is inclined to be from different financial agencies. The source of the memory has great influence on the uses. The productive loan mainly comes from formal agencies, and the living loan mainly comes from informal agencies.(3) The existing development of rural financial market has limited effect on the increase of the rural households’income, and the pell-mell liquidity of rural households reduces the rural economic development vitality. Pell-mell expansion of the rural loan scale, the rural households liquidity has no advantageous effect on the income growth, and can limit the potential increase of the future income, thereby impairing the lifelong welfare of the rural households and the increase of the rural economy, ultimately making the rural economic society deviate from the path of sustainable development.