The Study On The Sustainable Development Of Rural Microfinance

Microfinance is a special form of credit to provide direct loan capital and the comprehensive technology services to poverty-stricken population in a certain region, according to specific objectives and particular institutional arrangements. Microfinance, the organic compound which integrated the organization innovation, financial innovation of credit activities and the projects of helping the poor households, played an important positive role in promoting harmony development of social equity and economic efficiency in historical process. How to promote the sustainable development of rural microfinance in order to share achievements obtained from the reform and opening up, social development among poor farmers is of great practical and theoretical significance for the creation of a harmonious society.We can understand the concept of sustainable development in microfinance from two points, the narrow one and the broad one. Narrowly, keeping the sustainability of microfinance means that financial agencies'revenue generated by their own credit services can cover their operating costs and capital costs, to ensure that the revenue is higher than the expenditure, namely the commercial sustainability of microfinance institutions. The generalized sustainable microfinance includes the sustainable organizations and the sustainable financial aspect. Considering the important status of financial sustainability in the meaning of the sustainable development of microfinance, this paper will focus on this aspect.This paper, using many concerned theories such as micro-economics, monetary and finance, and the sustainable development, argues that to achieve sustainable development in rural areas microfinance, the basic conditions should be to maximize both the expected return of the borrowers and the lenders. There are four main impact factors, including weak incentives to the subject of demand in microfinance, weak incentives to the subject of supply in microfinance, weak regulation, and low efficiency attributed to interest rates constraints. In order to measure the sustainable development extent to which rural microfinance reach, twelve basic indicators set up from five aspects, that is the region's economic development level, the rural market orientation, the interest rate policy, the management of the microfinance institutions, the social credit environment. A mathematical model is established to assess and analyze of the case, on which several proposals about promoting the sustainable development of rural microfinance policy are provide.The innovation of this paper lies in firstly suggesting the basic conditions for the rural microfinance's sustainable development is to maximize both the expected return for the borrowers and the lenders. Summing up the influential factors of the sustainable development of rural microfinance in China, the paper designs a measurable indicator system of sustainable development for rural microfinance and analyses of a virtual case. There have no empirical analysis of the correlation between indicators. And the case study is not comprehensive, resulting in some limitations with analysis conclusions. All of these need to be studied continually in the future.