On The Function Of Government In The Issue Of Farmers Loan

The development of agriculture needs the support of loan.The farmer's demand of loan is great,but the actual rate of borrowing is very low,indicating that there are difficulties.China's rural loan market is controlled strictly by government.Therefore this article research the role of government,using farmer's loans as starting point.Agriculture is well-developed in Shouguang area.Building of agricultural facilities need more money,so Shouguang could well reflects the situation of agricultural loans .In this study,I paid questionnaires to 50 rural households from three villages.I found that most of farmers have difficulties of shorting money.The majority said that they may borrow money from banks;a small number of them utilize banks as their first choice.Because there are many difficulties when they loan from the bank.The supply of loan from the bank can not meet the demand in rural areas.The interest rate and cost is high.Farmers lack of collateral security and mortgage.Loan varieties are not suitable.Such factors suppress the demand of loan from supply-sides. Fluctuations of agricultural products prices led to uncertainty about the future earnings.This factor also suppresses the demand.Above two factors cause the contradiction that the incidence of borrowing is low although the demand is high. These mean that the allocation of resources is inefficient.Information asymmetry result high transaction costs.The rural credit union is monopoly in rural financial market.Externalities of agriculture are conflicts with the nature of capital.Above factors result the failure of rural financial market. Government policy aggravates the failure.Therefore,the government should reduce the unsuitable intervention to the business of financial institutions.Increasing the transparency of information,and relaxing restrictions of market access,supporting the development of farmers mutual aid organizations,to promote the development of rural financial.