Research On Development Mode Of China’s Rural Financial Institutions

The reform of RCC(rural credit cooperative) in2003is the mark of a new round ofrevolution of rural financial institutions. China has achieved remarkable results in the pastyears: at the end of December in2012, outstanding loans in all financial institutions inrural areas are14.5trillion million. The data increased with188.6%compared to the dataat the end of2007, with an annual growth pace at24.4%in the past five years. However,there are still deep-seated problems in rural areas. Agricultural finance can not totallymeet the finance demand in the countryside, where a growing science and technologydevelopment taken place. In the future, we need to gradually worked in practice and toexplore the issue: how to deepen reform, how to make rural financial services play acentral role in supporting agriculture development and benefitting farmers. This paper isdivided into five parts:The first chapter is the analysis of the background and the importance of the paper.Summing up the research theory of the development of rural financial institutions isnecessary. Afterwards, I pointed out the shortcoming and innovation of this article.The second chapter is the introduction of the theories of financial development andrural financial development. This chapter begins with the financial development theory,analyzes the relationship between financial market development and economic growth.Then I describe the development of rural finance theory by comparing threerepresentative theories. This chapter introduces a lot of theories which will help usresearching the rural financial development mode.The third chapter focuses on the analysis of the current situation of China. I take thecomparison and analysis methods and use a lot of charts to illustrate the status vividly.Analysis consisted the following3aspects: First, an analysis of the main financialdemands and supply resource in the rural area. Funding demands come from poorfarmers, maintenance-type farmers, market-oriented farmers, rural businesses, andleading enterprises in rural areas. Fund supply including commercial type institution,policy institution and cooperative institution. Formal financial institutions play a leading role in the system. The rural credit cooperatives and new-type rural financial institutionsare the core role in rural financial system. Second, we explore the new trends of financesupply in the context of financial reform since2008. Third, we explore the relationshipbetween formal and non-formal finance institution. We also explore in the perspective ofthe operation size about the finance institutions how to effectively supply funds for themarket.The fourth chapter mainly summarizes the practical experience of rural financialinstitutions construction from the other countries, such as United States, Japan, Indonesiaand Bangladesh. By combining the experience of other countries and the currentsituations of China, we propose various measures to improve rural financial institutions.Such as: diversification of rural micro-finance institutions, selecting the appropriate clientpositioning, establishing a flexible credit mechanism, promoting financial productinnovation, improving the legal system and so on.The fifth chapter mainly analysis the problems in current rural financial institutionsthen put forward suggestions for the problem. At the end, we select the developmentmode in the future. Market mechanisms should be used in conjunction with thegovernment’s macro-control. The ideal finance system should be consisting of thecommercial institutions and cooperative institutions.In conclusion, the paper found that in order to improve our current supply system ofrural finance, we should continue play under market mechanisms and governmentregulation. But we must change the impetus from government to market step by step.Cooperative financial institutions should continue to deepen reform and acceleratebusiness transformation, improve profitability, enhance internal accumulation; we shouldconstruct a rural financial system made up of joint-stock institutions, cooperativeinstitutions, and new-type financial institutions.