Theoretical Analysis On Vertical Link Between Rural Formal Finance And Rural Informal Finance

The falling of rural economy is being paid close attention gradually. In the course of looking for the cause of rural economy falling behind and seeking for measures that boosting rural economy developing and, realizing city and countryside balanced development. From the angle of finance to resolve this problem is being entering people's vision. Due to insufficiency of rural finance resource urges a peasant household to take the conservative and traditional production mode and abandons the high efficiency technology, the benefit of scale economy for the thinking of risk safety. Rural economy is caught in the "trap" that low level of growth for this reason. The rural credit marketplace shows the market structure being to stratify, formal finance and informal finance. The existing of these two departments side by side shows the rationality existing. Taking the advantage of these two departments so as to increasing supply of rural area credit, "vertical links " arising at the historic moment from this. Whose aim is expanding the loan that informal finance lends to peasant household by the fact that formal finance increases the fund supplies to informal finance. The main body of this paper is analyzing the efficiency of the vertical links, premise condition of the vertical links, feasibility of vertical links. Think that the "complementary relationship" between formal finance and informal finance only standard is a prerequisite for realizing "vertical links ". And have found the factor affecting the relevance that "complementary relationship" forms. The relationship between Formal finance and Informal finance maybe form competition or conspiracy. The competing is help to realize vertical link. Relaxing the assuming condition in further, great majority finances in our country area is formal finance that show market structure characteristic of monopoly. The surplus of "vertical links " may possibly be held completely by the monopolizer, have enlarged rural area fund supplying at the same time, whose price is the rural area inequality have aggravated. Rural cooperation organizes and agriculture faucet enterprise in our country is a very important informal, that these organize is not able to occupy surplus completely, therefore its should be look as a importance participates that realize vertical link. Besides the conclusion certificate the feasible of "vertical link "only as far as two branch operation is concerned. In a word, the vertical links is feasible in developing process in our country rural economy, but that this can be carried out is conditional and Should be based on everywhere reality as a result in putting process into practice, the policy should depend on each anticipates and can not be engaged in a one pattern. The more high degree of peasant systemization, the more high of commercialized, vertical links more effective.