Study On Factors Of Farmer’s Formal Credit Constraints From Perspective Of Income Quality

With the deepening of rural financial reform, China’s rural financial market had a good and orderly development. It makes a great contribution to the rural economic growth, improving the living standards of farmers. Because of the weak foundation before and the lack of investment, the allocation efficiency of rural financial market is very low, the credit constraints highlights. Credit constraints have become a bottleneck restricting the further development of rural economy. Farmers’ income is an important factor affecting the development of rural credit. It has a very close relationship with money demand and supply. Farmers’ income had growed rapidly since 2004, but it can’t represent the development of income quality. There are also some problems in income quality, like strong risk of volatility, single channel of income source, high cost of obtaining, weak knowledge and skills. So the level of farmers’ income is still low. Income quality issue revealed exacerbated the credit constraint conditions of farmers, being an important reason to hinder the healthy development of the financial market. The previous studies only focus on income quantity, ingoring the stability, structure, cost and skills of the income. So the previous studies failed to fully reveal the credit constraints problems. The article studies the factors of credit constrains from perspective of income quality, expecting to solve the financing problems of farmers and make constribuctions to the development of rural financial market.In this paper, we firstly analyze causes of credit constraint mechanism and the harm with theory of credit constraints, credit rationing and financial exclusion in rural financial market. Then the article use 1420 questionnaires from farmers and 599 questionnaires from the loan officers to analyse farmers’ income quality, credit behavior, credit constraints and loan officers’ credit preference, risk perception characteristics. Finally, the article analyses the key factors of formal credit constraints with Logit model and Likert scales from capital supply and demand, giving suggession to the development of rural financial market. We conclude the following conclusions:Income quality is the key factor to influence the demanding and supplying credit constraints. Income adequacy, income stability, income structure are significant factors of credit constrains. Some aspects of income cost and income skill have significant impacts on credit constrains. The lack of effective financing needs of farmers had become a serious problem in farmers’ financing. Most farmers borrowed seldomly because they were lack of profitable projects. Credit constrained households in the overall proportion is not high, but accounting for more than half of the existing financing needs of farmers. So the credit constrain is still very serious in rural financial market.There are obviously differences between two credit constrains types, we should distinguish them in order to solve the problem. Farmers have serious cognitive bias on the formal credit, it has become a significant reason for the credit constraint.Based on the conclusion, the article gives suggestions about improving farmer’s income quality, easing credit constraints, promoting reform and innovation of rural financial system, developing the rural economy.