Study On Borrowers' Project Benefit With Co-financing

Microfinance is the important service in capital market, but the principal pathway of helping to eliminate poverty. In international community, Microfinance has been regarded as one of the best efficient methods to eliminate poverty. with Chinese economic reform, the gap between the wealthy and poor has been increasing while its economic aggregate keeps going up. In order to alleviate rich-poor gap, in 1990's, our government carried on several plans to aid to poor region with microfinance, such as poverty-relief program, policy-related microcredit and issue micro-loan companies license. However, there are various inherent limits in microfinance running mode and poverty alleviation efficiency. Thus, it becomes extremely practical meaningful to study on borrowers'project benefit with co-financing form poverty alleviation institutions and microloan companies, and enhancing its poverty alleviation efficiency.In this paper, the study is based on the outstanding achievement in microloan and capital market which were proposed by the former researchers, and analyses borrowers'project benefit with co-financing form poverty alleviation institutions and microloan companies. First, with the suppositions in researches of the cooperation of formal financial institution and informal financial institution in developing countries, we create a economic model that describe the borrowers'co-financing behavior with informal lenders and formal lenders. According to the model, we analyze the difference of project profit between installment repayment and expires a time to repay principal and interest. Secondly, with characteristics of project, the price of poverty-relief loans and the price of microloan companies'loans as independent variables, and the increase of project profit by getting into debt with installment repayment as dependent variables, we discuss the changes of dependent variables when independent variables are undergoing modifications. Finally, summarizing the analysis above, we give the advise that poverty-relief loans and microloan companies should cooperate with each other and take a payment method of installment. Then, we point out the shortcoming of this paper.