The Credit Rationing Study On Chinese Farms By Perspective Of Demand Characteristics

The rural economy development restricts the future of China economy, and thehealthy development of the rural credit market is of great significance to improve theincome for farmers and to narrow the income gap. Early rural financial reformpolicies that simply to increase credit supply encountered new challenges, the farmerswho abandon formal financial loans are raising. Many scholars argue that creditconstraints are not only from the financial sector but also from the needs of those whofaced risk avoidance, cost avoidance and cognitive avoidance. The existence of thesefactors will lead to the failure of simply increasing the supply of credit. The earlymeasuring methods are neither good operability nor reality. The DEM questionnairemethod based on field survey has become intentional popular. The article distinguishcredit rationing into supply and demand rationing using the data of People’s Bank ofChina survey of farmer, and further divide demand rationing into the riskrationing,cost ration and social capital rationing.It is important to analysis the mechanism and the influencing factors of demandrationing. The relationship among cost rationing, risk rationing and social capitalrationing is closely in rural areas. Risk avoidance, the difference between them is notsignificant.Cost avoidance and social capital avoidance is the result of imperfectlycompetitive rural financial markets and government intervention. In demand rationing,the cost rationing is greater than the risk rationing and the risk rationing is greaterthan the social capital rationing. Logistic model results suggest that the role of laborcharacteristic variables is not significant, external constraints and family economiccharacteristics variables are significant. Multinomial Logistic model results show thatthe coefficient of the variables are small, the effect of main source of income and theborrower wishes variables is significant. Compared with social capital rationing, inaddition to the regional variables, the effect of main source of income and cashhandling is negative to cost and risk rationing, the role of the remaining variables arepositive.The paper put forward three suggestions from the demanding characteristics offarmers. Lower transaction costs, reduce and disperse the risk of loans, improve loantransparency and strengthen relationship between farmers and loan agency. The paperalso put forward three suggestions from external constraints, economic characteristics and cognitive characteristics. Strengthen rural financial services convenience,improve the level of financial knowledge，improve cognitive biases of farms and theability of the farmers to earn income. In addition, the formal financial institutions inrural areas should introduce more relevance and usefulness of financial products andservices to release the potential effective rural credit demand through demandcharacteristics of farms.