Saving And Loan Behavior Of Rural Housholds In Less Developed China

The rural finance is an important support for the new countryside construction and urban and rural integrated development. However, there are many practical problems of the rural finance, such as the shortage of rural credit funds, severe outflow of rural capital and the difficulty for rural households to obtain loans from formal financial institutions. In order to solve these problems, scholars carried out a lot of research on rural finance from the supply and the demand, which include investigating, describing and quantitatively analyzing the savings and loan behavior of the rural household, basic unit of rural economy, reaching at many useful conclusions. But the results for the rural household in less developed areas are less, and the analysis about the evolution of savings and loan behavior are much less. Besides, there is no analysis of willingness to loan and investment of rural households. Therefore, this article probes into the savings and loan behavior of rural households in less developed areas, taking Henan Province for example, a traditional agricultural province. With the serial data of 1000 rural households at fixed observation points from 1995 to 2004 in Henan and the comprehensive data of 1251 rural households from 11 sample villages surveyed by the National Natural Science Key Project discussion group in 2007, the article analyzes the characteristics, evolution and influencing factors of savings and loan behavior for rural households, and potential borrowing needs, using descriptive statistics, regression analysis, ranking selection model and logistic model. Through in-depth analyzing financial demand of rural households in less developed areas, the study will promote to solve rural financial problems and develop rural economy. The following is a summary of the conclusions.(1) The rural households face the more uncertainty in less developed areas. The majority of rural households hold cash as a way of savings while deposits and lending is less. On the one hand because the rural households lack excess funds, on the other hand because holding cash could prevent the emergency incidents, which reflects that the financial services in the less developed areas are not convenient. There is a need to add rural financial service network and improve rural financial services quality. In addition, as income levels of rural households increase, the demand of deposits is rising, though the growth is not rapid. In the aspect of the amount of savings, the average saving amount in less developed areas is less than the one in developed areas. Compared with the national level, regardless of the number of rural households with deposits, the deposit amount, or the amount of holding cash, Henan are lower than the overall average. Therefore, it is necessary to increase rural household income in the less developed areas.(2) The savings amount is highly correlated with rural household net income. And the marginal propensity to saving (MPS) of rural household is very high. From the change in trend, the MPS has a downward trend, which is contrary to the view that the MPS will increase as incomes is rising. In the short period of time, the MPS is still relatively high. The strong income elasticity of rural household savings (1.4232) is the main reason for the high MPS, and the traditional culture, inadequate social security system, and lagged rural financial system are its specific reasons.(3) During 1995 and 2004, the average savings rate was 0.25, lower than one in Zhejiang, but more stable, and also lower than the national average. The rural households from different villages have different savings rates. Generally speaking, the rural households from a village with higher income have the higher savings rates. Household savings rate is affected by many factors. Because a model, which is explained by household income and expenditure, age of householder, the educational level of household main labor, the main characteristics of family, liquidity constraints, is not perfect, there must be the other important factors, such as traditional culture, macro-economic variables and so on. The regression result shows that many factors have significant effects on savings rate, which include the terrain in which rural households live, household business income, outwork income, the other non-lending income, household operating expenses, living expenses, the other non-debt expenditure, the domestic labor burden rate, and a dummy variable that represents the main source of household income coming from farming. However, the educational level of household main labor has little effect on savings rate.(4) The rural households in less developed areas have many loan characteristics that are same with the existing results. The incidence of household total lending has gradually reduced over time. Most rural households borrow from private finance, in contrast, the rural households which loan from banks or credit unions are rare. This will exist for a long time. The amount of loan is mainly between 1000 and 3000, but the demand of 10 thousand and above has shown an increasing trend. The loan for living is more than one for production, and the rural households with loan for living are increasing while the rural households with loan for production have fluctuated. These require financial institutions to consider the loan for living, small loans and large demands.(5) With the rural economic development, the willingness of investment and consumption of rural households in less developed areas has increased. Meanwhile, the proportion of effective investment is high. There is a vast new financial market in less developed areas. However, the potential investments of rural households have very high risks. It is necessary to improve rural household quality and ability to resist risks and to strengthen the development of the rural insurance.