The Follow-up Study And Performance Analysis Of Rural Credit Union Funds

Rural issues is an everlasting concern for many years. China is facing a new turning point in the transition from postindustrial to industrialization. The reform of the rural economy has entered a new stage. As most commercial banks withdrawing from rural areas gradually. Agricultural Development Bank evolving into policy institution specialized in acquisition of grain,cotton and oil、rural credit cooperatives undergoing twists and turns、rural cooperative foundation being banned......The development of rural cooperative finance in China has been struggling for a long time. Under this circumstance, many scholars even suspect that cooperative finance in our country has no conditions for survival.At the same time, the rural credit union funds, constantly being replicated nationwide, becoming the hot spot of the rural financial problems. As an endogenous institution, rural credit union funds have experienced more than five years of exploring process, whether the operating situation is consistent with the theoretical analysis? What are the mechanisms of functioning? Is there any variation? What is the performance of the rural credit union funds? What factors will affect performance of the credit union funds?All of these questions are worthy of deep thinking. Based on the field research of the first credit union funds in Sichuan Province——Yimin Credit Union Funds in Cangxi, the city of Guangyuan. This article tried to make in-depth follow-up study of the development situation, and analyze the performance of rural credit union funds. This will help to understand the reality of the rural credit union funds, provide theoretical and empirical reference to improve the development of the rural credit union funds.The article focused on two aspects:the operation of the rural credit union funds and performance analysis.The first part of this article made a review study of rural credit union funds, on the basis of summarizing the achievements and shortcomings of the research, determined this article’s focal points. The second part was a follow-up study of the rural credit union funds. Through field research, tried to understand the mode of operation in Yimin Credit Union Funds in Cangxi, the city of Guangyuan. Focused on the issue that whether the operating situation is consistent with the theoretical analysis、the mechanisms of functioning and whether is there any variation. The third part was performance analysis, designing the questionnaire and field research. Based on the financial data analysis, this article analyzed financial sustainability, and summarized the internal performance of credit union funds. Based on descriptive statistical analysis of the sample households characteristics, the article analyzed credit union funds’ ability to meet demand for funds, then analyzed credit union funds’ function to promote production and enliven local economy. By the analysis of breadth and depth in the service of rural fund funds, the article summarized rural fund funds’ external performance. The fourth section summarized the critical success factors and development bottleneck of Yimin credit union funds. And on this basis, we had the fifth part of the article, from both internal and external factors,analyzed factors affecting the performance of rural credit union funds.The sixth section summarized the main conclusions of the study, and made deep thinking on some controversial issues in the development of rural credit union funds.This article described the mode and mechanism of operation in Yimin credit union funds from the following seven aspects:governance structure, loans design, use of funds, accounting and financial processing system, interest rates and settlement mechanisms, operating costs, external risk control. Concluded:the operation and development of Yimin credit union funds has been in line with the principle of cooperation and mutual assistance in rural areas instead of alienation.This article analyzed the operational performance of the rural credit union funds through field research. Based on the financial data analysis, this article analyzed financial sustainability for credit union funds.Based on descriptive statistical analysis of the sample households characteristics,especially farmers’ attitudes toward credit union funds, the article analyzed credit union funds’ ability to meet demand for funds, then analyzed credit union funds’ function to promote production and enliven local economy. Borrowing farmers speak highly of Yimin’s operation,Yimin funds had2001union members, which was up to85%coverage. Higher coverage of farmers not only reflects the system’s rationality, but also reflects the effectiveness of the union to serve the local financial environment. Yimin Credit Union Funds helped to ease the farmers who are lack of funds, provide effective and convenient financial service in the rural areas, helped to promote production and enliven economy. By the analysis of breadth and depth in the service of rural fund funds, the article summarized rural fund funds’external performance. Thus, this article gave a positive answer to the follow-up study of Yimin credit union funds’practice and effect.For the Yimin credit union funds, its experience of success is mainly due to its lower information cost, lower management costs, lower origination costs and higher cultural identity. Specifically because of the network in acquaintances society, reducing the cost of information, thus reducing the adverse selection and moral hazard.Secondly, the constraint mechanism in acquaintances society reduced the dependence on mortgage, which guaranteed a very low loan default rates, bringing about operational and cost advantages. Thirdly, with the help and support from many institutions, Yimin reduced the cost of initiation, which made it profitable quickly after its opening. Fourth, as an endogenous financial institution, Yimin achieved a higher coverage of farmers because of higher cultural identity.But the credit union funds remained bottlenecks in the development, mainly because of a dilemma in expansion, funding sources, supervision and management gaps.On the basis of Yimin credit union funds’development experience, this article summarized the internal and external factors that affect the operation performance of the credit union funds.The internal factors can be subdivided into human factors, institutional factors, material factors and reputation factors.Human factors referred to the spirit of cooperation and democratic management, and the authority in the village,which can ensure that rural credit union funds maintain its soul of "mutual aid".Institutional factors, which can improve the organizational system, was a sound regulatory framework.Material factors, including the amount of money paid for shares,as well as the number of members of the credit union funds,these two aspects determined the size of the credit union funds, was the basis of the institutions for further development;The reputation factor was not only able to get a sense of identity and trust, but also circumvented to some extent by increasing the exposure of the credit union funds, which can reduce the risk of potential problems.The external factors which referred to the credit union funds’ legal,regulatory,and economic environment,and relations between the credit union funds and regulatory authorities、rural credit cooperatives. rural financial institutions、rural production cooperatives and policy banks.The last section summarized the main conclusions of the study,and made deep thinking on some controversial issues in the development of rural credit union funds.Mainly discussed the following issues:is there vitality of rural credit union funds,the license of the credit union funds,the regulation of credit union funds,business tendency of credit union funds,the financing problems of credit union funds,the problem of credit union funds’ scale.