Studies On Cooperation Between Formal Finance And Farmer Cooperatives - Distribution Of Benefits Perspective

The rural economy can not develop rapidly without the support of rural formal finance. Based on the requirements of costs, profits and risk control, there are many obstacles for formal finance to support the rural areas. The information superiority and security features which farmer cooperatives possess can solve the problems of asymmetric information that formal finance enter rural markets must be faced. Through certain channels to make them cooperate is an important way to solve lack of rural finance. This paper based on the basic theory of cooperation between formal finance and the farmer cooperatives, selecting the distribution of benefits perspective, discussing how to distribute the benefits during the cooperation, in order to make the cooperation has a solid foundation, and increase the stability and sustainability of cooperation. This paper is to try to analyze this issue systematically, in order to find an effective way to increase the capital supply in rural areas and provide a reference for policy makers to develop policies to promote bilateral cooperation.In the beginning of the paper, a brief review and assessment of related researches in the domestic and abroad was written, and then describes theoretical basis of cooperation between formal finance and the farmer cooperatives. This paper selects 16 typical cases in 6 provinces and 1 city of eastern, central and western China, concluding the general procedure of the cooperation between the formal finance and farmer cooperatives. Based on the loan processes, summarize and analyze the different forms of credit ratings, loan guarantees and loan regulatory which reflect differences in the distribution of benefits. Selecting the option system and contract system, and then constructing behavioral models separately and completely. Take the size of loans, loan interest rates, risk, transaction costs and profit as the core of the distribution of benefits to discuss principles and forms when distribute the benefits should obey. And then take the Sheqi case as an example, the distribution of benefits under the contract system of the content, process and results were discussed in detail, and make the corresponding evaluation. At the end of the paper, drawing the conclusions and giving reasonable policy recommendations in order to guide a reasonable distribution of benefits between formal finance and the farmer cooperatives, thereby contributing to the formal finance and farmer cooperatives to better cooperation.The main innovation points in this paper are placing the formal finance and farmer cooperatives on an equal partnership, and discuss the cooperation in distribution of benefits perspective. This paper constructed a complete behavioral model to deduce and analyze the operational mechanisms and principles of the option system and contract system. In the option system, there exist two programs for distribution of benefits, single interest rate program and mixed interest rate program, choose which programs depends on the farmer's overall risk of type cooperative members. Under the single interest rate program, formal finance offering all loans, charging a lower interest rate, bearing the risk, and sharing the benefits with the farm cooperatives. Under the other program, the distribution of benefits depends on the type of members in credit risk. In the contract system, the conclusion of model is that the core of benefits distribution is the design of loan interest rates and loan terms in contract. The interest rates should consider the formal finance cost of capital and form an incentive for farmer cooperatives. Link the Loan amount and repayment rates in order to constitute the constraints of the farmer cooperatives and incentives.