The Less Developed Western Regions Farmers Funds Lending Practices Study

Along with three decades of Chinese reforming and opening up, the rural financial system has been on the track to the development goal through a series of reforms. Though the consensus that a diversified and competitive financial system should be established has been reached in government and academia, the stock reform of each kind of financial institutions based on the frame work should still be planed cautiously. Especially in the western China, due to lag of productivity, low quality of labor and slow growth of rural markets, the remedy in solving the financial problems should be worked out with the consideration of the characteristics mentioned above. In addition, academic researches on China's rural finance have made great contributions to the reform and development of rural finance system. However, generally speaking, a large number of researches focus on finance institutions' survival. Nowadays, China's rapid economic and social development has put forward higher requirements to the development of China's rural areas. To truly understand wishes of rural households and to build a rural finance system for the sake of serving households in their producing and consuming activities, it is necessary to make households the main line of academic studies. To act as the entry point for rural finance issues, comprehensive and accurate understanding of the households'behavior characteristics and influencing factors provides evidence for rural finance institutions'market positioning, business development and financial innovation.This study is based on the rural households'behavior theories, basic model of expected rate of return and researches on the similar theme home and abroad. Starting from the overall review of China's rural credit system, this paper summarizes and describes the borrowing behavior's characteristics of the rural households in underdeveloped areas of the western China. Meanwhile, this paper also verifies and analyzes the influencing factors of the rural households'borrowing behaviors, and finally ends with the suggestions to improve the rural finance system. In the methodology part, first of all, this paper brings up the basic assumption which postulates that households are rational on borrowing behaviors, and then puts forward the assumed influencing factors based on the basic model of expected rate of return. Finally, this paper chooses the Multinomial Logistic Model to test whether the assumed factors have a significant impact on households'borrowing behaviors, and tries to give explanations to the test results. Through the theoretical and empirical research, this paper concludes as follows: First, there are distinctive features existing in such aspects of rural households'behaviors as the saving behavior, the resources of loan, the cost of the borrowing, the use of the funds, collateral and the interaction with the rural cooperative union; Second, there are several influencing factors are found to have significant impact on the households'borrowing behaviors, such as individual differences, family conditions, insolvency, attitudes toward formal finance institutions and etc.; Third, this paper puts forward a series of realistic and well-founded recommendations based on the results of the study of the rural households' behaviors.This research is part of the academic program—Rural Households'Financial Cooperative Activities in Western China (70673081), sponsored by the National Natural Science Funds.