Research Of The Microfinance Company’s Legal Regulation

Microfinance company is the Enterpriseas Legal Person to provide micro-loans to small andmedium enterprises and the farmers, especially takes efforts to solve the problem of financing ofsmall and medium enterprises. This article intends to start from the relevant legal regulation ofeconomic law theory, combined with the instances of various places, and through data analysis, todemonstrate from four aspects. The first is to define the identity of the microfinance company. Thesecond is the rules in running. The third is the risk in running. The last is to development ways tomicrofinance company. These four aspects are to promote and improve the microfinancecompany’s run system.The first part of the article is to analyze the value and location of microfinance company.Firstly, it elaborates the historical evolution of microfinance company. Secondly, it verifies presetvalue of microfinance company through data analysis and functional defined. Thirdly, according tothe legal definition and behavior define microfinance company has commercial corporate natureand quasi-financial institutions which calls "amphibious". On the analysis of the legal and practicalpoint of view the development of microfinance company, microfinance company will be better ifbe recognized financial institutions to promote the company’s development, regulate the behaviorof its operation.The second part of the article is to discuss about microfinance companies’ operating rules andlegal control. Firstly, it makes a comparative analysis of Microfinance Company with commercialBanks, financial companies and pawnshop operation rules system. Then,，it proposes the contentand importance of microfinance companies’ running rules based on theories. Through the analysisof current policy and practice experience, it also points out the deficiency of MicrofinanceCompany operating rules. In the end, it puts forward for the operation rules of micro-creditcompany’s perfect based on instances, indicates that it is necessary to specify the financial status ofthe Microfinance Company, to relax the conditions of the main sponsor and shareholding, tobroaden the financing channels, to introduce the independent director system in the governancestructure.The third part is to discuss about the risk of running and legal control of microfinancecompanies. Firstly, it points out the inside and outside risk in the operation of microfinance company. Secondly, according to the theory of economic law regulation it points out that thecompany should improve both external supervision and internal control to face the risks. First, itshould establish an association of industry self-discipline mechanism, set a unified regulatory bodysystem, through government and industry associations, to implement the joint supervision. Second,it should perfect microfinance’s internal risk control mechanism.The fourth part is to discuss about microfinance companies’ future development ways andimprove the legal system. The future direction of microfinance companies has three, the entity’smicrofinance companies, network-based microfinance companies, and restructure to rural banks.First, make a unified microfinance law to regulate microfinance companies. Second, thenetwork-based microfinance company should pay more attention to network monitoring, enhanceprofessional regulatory. Finally, allow the company to become the largest shareholder ofmicrofinance rural banks, reduce the transformed requirements of rural banks, to improveconversion initiative.