Informal Finace, Rural Household Financing And Rural Households' Income

The question of "rural households' income"is the core of "Three F Issue", is also one of the events which government pays close attention to. To allocate fund effectively is essential with regard to solve this problem. However, due to finance constraints and "dual finance" structure, the formal financial institutions have little ability to fit the rural households' fund needs.The informal finance develops the extremely vital role at this point. More and more scholars and policy-makers pay attention to it.This paper attempts to prove the informal finance satisfying the rural households' financing needs based on the questioning data in Wenzhou rural area. Further we discuss the relation between informal finance and the rural households' income using the data of rural static observation point. The main contents of this paper are as follows:First, we review the historical path of the informal finance development in Wenzhou, give the objective description of its realistic condition, and analyze the role of the Central Government and the local government in Wenzhou, which plays in the informal finance developing process.Second, based on the data from questionnaire of rural households in Wenzhou, we discovered that the informal financial institutions in local area have unique and effective mechanism by contrast to formal finance. They have more ability to fit the rural households' various fund needs of different income grades than the formal ones.Third, based on the data collected in rural static observation points, we attempt to discuss the relationship between informal finance and the rural households' income growth, and the one between informal finance and income disparity using panel data model. The basic conclusions are as following:Compared to formal finance, the informal finance is remarkable advantageous to the growth of the rural households' income in the statistical significance. The formal finance causes the income disparity increasing between rural households, while informal finance has a certain effect in reducing the income gap between rural households.Finally, according to investigates and the result of empirical research, we propose countermeasure for policy-makers from different angles, and hope to help them to establish a rural financial system which adapts the demand of rural households.