Research On The Legal Supervision Of Rural Micro-Credit Companies Of China

The lack of efficient financing and lending channels for farmers and rural micro-firms is one of the problems restricting the development of agriculture, rural areas and farmers. With a logic start of the internationally popular small-credit, the rural small-loan companies are set by enterprises or individuals that have abundant capital to provide loans which is small yet could meet their financing needs to credit vulnerable groups in rural areas. And it is of positive significance to solve financial problems and to realize equal credit rights for the vulnerable groups. In accordance with related laws and regulations, government conducts efficient external supervision over rural micro-credit companies, the emerging non-bank financial institutions. And this is of essential importance to promote the sustainable development of these companies.The paper is divided into two parts:introduction and body:The introduction is about the background of thesis-choosing, mainly the backgrounds of domestic and overseas practices and the laws and policies in China. The paper summarizes the research achievements from both home and abroad, and then puts forward methods and viewpoints to be used as a basis for the following parts.There are altogether five chapters in the body:The first chapter is about the general situations of rural micro-credit companies in China. Carrying on no savings but loans makes them different from common corporations or traditional financial institutions. Therefore, these companies should be positioned as non-bank financial institutions and be put under the supervision of government. And government should supervise the market access and exit, market operation and other risks of these companies. The goal could be realized by improving the laws and the regulations and making use of the informal norms.The second chapter is about jurisprudential analysis on external supervision of rural micro-credit companies. Based on the theory of market failure and national regulation power and the essence of economic law, the paper demonstrates the legitimacy of external supervision. The real worth of this work lies in that the finanical interests of the peasantry and rural micro-business are protected effectively,the safty of the whole rural finanical system are ensured,and it can promote fair competitionon between the finanical subjects in rural areas.The third chapter is about the current situations and problems of external supervision over rural micro-credit companies in China. The supervision includes market access and exit,business operation,and the exiting risk.The external supervision lacks high-order laws and is restricted by laws. Therefore, the debtor lacks efficient pledge, and government is not professional in supervising and at the same time demonstrates the invasiveness of administrative power.The forth chapter is about reviews of the experience of rural micro-credit business in foreign countries. Internationally, specific regulators conduct non-prudent supervision over the micro-credit companies which carry on no savings but loans in accordance with related laws. We could learn from the Grameen Bank that the special legislation,the corporation’s independence and the innovation on the mortgage system is necessary. The law system should consitent with the local culture.The crisis of micro-credit in Andhra, India,shows that the government should not neither be laissze-faire nor conservative.Both the investors and the borrowers’rights should be protected. The problem of interest rate needs to be solved properly.The fifth chapter puts forward that the following things should be done, including building a multi-level supervision system and an efficient external supervision model, conducting specific legislation on the supervision over micro-credit companies, establishing a mortgage replacement mechanism, defining China Banking Regulatory Commission as the supervisor, setting up an association, and building a model that combines legal supervision and risk supervision, for management risk, debt risk,interest rate risk and adverse selection and moral hazard. The legislation should be based on the rural’s situation, guarantee equal rights, maintain the competition in the market and be non-prudential supervision. Make full use of social capital in rural areas and improve the system of crops and agricultural mortgage. The association could share part of the government regulatory functions.