A Study On The Influence Of Social Capital On The Rise Of Rural Informal Finance

Informal finance refers to various kinds of investment and fund debt-credit activities not supervised by the government. Informal finance will affect the scale and the structure of the rural finance market, and will also affect the farmer's cash-flow of production and non-production, then affect farmer's investment and other demand. In Chinese country, while the normal finance is short, we study the informal finance demand, especially from the angle of social capital, will be make more sense for the rural informal finance. This research analyses the effectiveness of relationship and credit, through the course of the attainment of the farmer's borrowing demand.As the supply of rural formal finance is lacking, the appearance of informal finance is an objective necessity, and it is offsetting the short of formal finance effectively, which optimizes resources allocation. According to the social capital in sociology and financial economics theories, we discuss the rural informal finance from the perspective of social capital, relating to reality. In view of social capital, the relationship influences the farmars'borrowing demand further than credit, and the effectiveness of them to the informal finance is different. The"relationship"solves the problem of"Whom to borrow"and the"credit"solves the problem of"Can we get". Understanding more about the role of social capital in informal finance is beneficial to the cultivation of residents'social capital, the development of informal finance, and to the financial administrative authority supervising the system of rural finance more efficiently. But, the problem of usury caused by rural informal finance deserves study.We put forward some suggestions based on rural informal finance. First, make Informal Debt-Credit Law to regulate informal finance; second, introduce rural financial institutions to strengthen competitive; third, establish farmars'credit system to reduce transaction cost.