Empirical Study On Informal Finance And Economic Growth

Informal finance is，as the name suggested，the financial sector which is notunder the supervision of the central bank.Even though informal finance is muchmore active and efficient in supporting agriculture industry and medium andsmall-sized enterprises(SMEs), there is no legal infrastructure that provides recourseto lenders and protection to depositors, once the potential problems outbreak, itmay have a negative influence on the economic order. Since the financial crisis of2008-2009, the importance of the non-public economic sectorhas drawn greatattention of the government; informal finance has got more and more recognitionover time.Anhui province is in the central area of China, with anaverage level ofGDP. The main industry in Anhui is agriculture. Comparing with adjacentprovinces, such as Zhejiang and Jiangsu, Anhui hasn’t fully exploited informalfinance’s benefits yet. In pursuit of dramatic economic development,industrialupgrading and optimization, it is of significant importance to acknowledge andunderstand the evolution, present condition and prospects of informal finance.Therefore, this paper digs deeply into the history, form of organization andmechanism of informal finance all over the country and particularly in Anhuiprovince. Indirect estimation method is used to estimate the scales of informalfinance of the whole country, Anhui province, and16municipalities at theprefectural level, VEC model is applied to do empirical analysis on colorationbetween Informal Finance and economic growth.This paper is divided into six chapters. The first part is an introduction;chapter II is literature review and basic theories about informal finance; chapter IIIfocuses on the history and different types of informal finance in China and in Anhui;chapter IV uses chapter V makes empirical testing of the relations between informalfinance and economic growth with the support of the data from last chapter; thefinal chapter suggests various evolving paths to boost economy growth viadeveloping informal finance, and gives advices on how to monitor, supervise andconduct informal finance.