Study On The Peasant Peer-selection Loan

Since the1970s, Microfinance Institutions have emerged continuously which aim to provide financial services for mid and low earning customer in rural areas. Group lending mechanism is a core mechanism for effective operation which enables Microfinance without collateral and guarantee to obtain the very high repayments rates. Peasant peer-selection loan in China draws on the experience of GB and localizes this pattern. The practice of developing area rural credit cooperative has the representation and multiplicity.In international research to group lending before mainly concentrates to the explanation of its high repayment rate, but in the newest progress mentioned its applicability and effectiveness. Through the empirical study to peasant peer-selection loan in Sihong County of Jiangsu Province we find its high repayment rate is similar to the international research. Both in Jiangsu Province and in Sihong County, the repayment rate is larger than90%. Speceilly in the first years, the rate reached96%. But because of the lapse of time and the development of economy, the repayment rate dropped slowly. We explain that traditional peasant peer-selection loan couldn’t adapt the demand of farmers as before along with the heterogeneity between group members.Sihong rural cooperative bank has promoted "bigger peasant peer-selection loan" and "greatly joint navigation"."bigger peasant peer-selection loan" forms a mutual benefit and mutual supervision joint guarantee organization in which farmers join the Cooperative organization and undertake responsibility mutually. The bank introduced "bigger peasant peer-selection loan" to entrepreneurial farmers and established the "greatly joint navigation" for privately or individually-owned business, adapted the economic development.Regarding this, this research brings the enlightenment is that any system and any kind of loan only have the good compatibility in its specific stage and in specific environment. When the external environment changes. its original compatibility will change. To realize the sustainable management of peasant peer-selection loan and adapt farmers" demands we need bring forth new ideas to the loan model.