Analysis Of Current Situation And Problems Of Rural Financial System

"Three agriculture problems" is the priority of Chinese economic development. In order to promote the development of agriculture, multiple level and improved rural financial system is the key point. The rural financial system reform is an important issue to raise farmers’living standard and plays a decisive role to the development of rural economy. Under this background, this article tries to explore present situation and existing problems of rural financial system reform and gives some suggestions so that we can make a contribution to the perfection of rural financial system.Firstly, this paper analyzes the current situation of the rural financial system from overall perspective. After making clear the definition of the rural financial system, we divide the rural financial system reform process into five stages and analyze the changes in the historical process. Then after the overall analysis, we find that, several major problems existing in the system are:Agricultural economic development restricts rural finance; different financial organizations still need further development; the rural finance focuses on the productive finance and ignores the consumer finance. This results that rural economic achievements can not enjoyed by farmers, which damps the manufacturing enthusiasm of the farmer; rural financial tool mechanism is not yet fully formed; regulatory measures have not been perfect.Secondly, this paper analyzes the current situation of the rural financial system from the perspective of different financial organizations. The main problems existing in rural credit cooperatives are the deviation from the principle of cooperation. They should find a balance between business and cooperation. At the same time, the rights boundary among the government, provincial and basic credit cooperatives should be definite; the main problems existing in town banks are the interest rate and risk control problems. The government should give them financial support, perfects the supervision and gradually reduce administrative intervention; for the agriculture and the agricultural development bank, the main recommendation is a rational allocation of resources. The banks should undertake the social responsibility; rural financial tool plays an important role in reducing risk. But rural financial instruments have not yet been established and financial innovation is urgently needed in this area. The design should be consistent with the safety and robustness principle; supervision is the central part of rural financial system. The government should continuously revise regulatory framework in order to maintain the stability of rural financial system.Thirdly, this article analyzes the experience of foreign rural cooperative finance. It is mainly divided into two aspects:Bangladesh Bank and foreign rural cooperative finance modes. Bangladesh Bank is the typical small credit company. It is specifically designed for poor people and there has been a number of countries imitating it. It is very suitable for developing countries. China should protect the folk finance, legislate as soon as possible to make it legal and set up the corresponding regulatory agencies. There are mainly four modes of rural cooperative finance in foreign countries: Germany, the United States, France and Japan. The Chinese rural cooperative finance should establish pyramid management system, adopt democratic management and external supervision. It should also combine the business interests and servicing three agriculture problems. It should adopt different financial modes according to different regional economic development situations and speed up legislation.Finally, the conclusion is that Chinese rural financial system does exist shortcomings and deficiencies. Comprehensively, the main improvements are the following several aspects:combining cooperative finance, policy finance and commercial finance; to protect the development of informal finance to make it become the favorable supplement to formal finance; to perfect legal laws and regulations and improve the regulatory mechanism.