Legal Issues Of Micro-credit Corporation

Micro-credit system is the financial institutional innovation of China's rural economic development. The successful experiences from the world demonstrate that the micro-credit system can strike a balance between the financial services and the poverty alleviation policy. Since 2004, the pilots of the rural micro-lending institutions have achieved success. Thus, China's rural micro-credit corporations develop into a new stage. As new rural financial institutions, micro-credit corporations grope forward in the conflicts between the commercialization and the goal of serving for"Three rural". However, due to the legal vacancy and the institutional obstacles caused by the immature system, micro-credit corporations face serious legal problems, such as the vague targeting, the deviated capital, the inefficient risk prevention mechanism, the unsound supervision mechanism and so on. All of those severely restrict the orderly development of micro-credit corporations. On the basis of the understanding the ideas, the history and the status of micro-credit corporations, by analyzing the existing legal problems, this thesis eventually forms the legislative proposals for improving the legal system of the micro-credit corporation.This thesis has been divided into four parts and it contains more than 35000 words.Part I: IntroductionThis part reveals the rural financial status of the imbalance between the capital supply and the demand, and points out that at this stage studying the micro-credit corporation has great significance. Moreover, this part has a general statement about the research objectives, the theoretical foundation and the research method of this thesis.Part II: An Overview of Micro-credit SystemIn this part, firstly, the thesis defines"micro-credit", pointing out that"micro"means the specific amount for loans is not a unified number but only the small amount and"credit"refers to borrowers can obtain loans by his operation ability, his personal credit and the production prospects. Secondly, this thesis makes a summary about the characteristics of micro-credit, describing its basic characteristic as the services for low-income groups, the unique credit capital demands, the loan without collateral, the flexible operation and the goal of serving for"Three rural". Thirdly, sorting out the development process of China's micro-credit corporations, this thesis points out that on the basis of summarizing the successful experience of the Grameen Bank's micro-credit model and combining with the actual situation in rural areas, China gradually embarks on the road of rural financial innovation in line with national conditions. It goes through the process that is from the early project pilots to the special support-the-poor cooperatives, and then carrying out the micro-credit service in various financial institutions nationwide, finally, micro-credit corporations are established.Part III and part IV are the key parts of this thesis.Part III: The Analysis of the Legal Regulations and the Legal Problems of Micro-credit CorporationsFirst of all, this part summarizes the legal regulations of micro-credit corporations. The micro-credit corporation is defined as a legal person of corporate enterprise, in purpose of servicing for"three rural", and its business area is limited in the county. Besides, its capital should be the corporation's own capital and it can't to deposit but only to loans. The supervision institution is restricted to the authority which is designated by the provincial government. Secondly, this part indicates the legal problems of micro-credit corporations, for instance, it only has the Guidance for specifications, and the terms are not specific. Furthermore, the legislative target is vague; the capital is deviating because of the inefficient risk prevention mechanism and the unsound supervision mechanism. Meanwhile, corporations face the gloomy prospect because it has to transfer the control of the corporation once the corporation can be transformed into the village bank.Part IV: The Legislative Proposals for Improving China's Micro-credit Corporation SystemBased on the analysis in the former chapters, this part puts forward legislative proposals for improving China's micro-credit corporation system. Firstly, this thesis proposes perfecting the basic legislative framework which is adhering to the principles of serving for"three rural", clarifying the legal status as special financial institution, and defining the basic functions as both commercial and supportive, as well as restricting the business areas to not to deposit but only to loans. Secondly, this thesis establishes the operating rules of micro-credit corporations, such as the prudential rules, the loan principle of"micro"and"decentralized"and the multilevel loan. Thirdly, the corporation's capital system should be improved. On the one hand, the installment payment system should be introduced to ease the pressure on capital demands. On the other hand, the currency should be the only form of shares. Fourthly, the supervision mechanism and the disclosure mechanism should be strengthened, and it should establish the collaborative monitoring mechanism involved the financial office, the China Banking Regulatory Commission and the People's Bank of China. Fifthly, this thesis suggests perfecting the relevant systems,such as credit rating systems, a more flexible interest rate system and assistance projects, for example, the financial subsidies, the tax benefits and the compensation funds.