Research On The Forest Right Mortgage Loan Based On Availability And Rates

Forest Right Mortgage Loan is a complementary measure of collective forest tenure reform. It can help forestry producers to obtain the necessary funds, activate forestry resources and promote the development of forestry. However, there are a few of drawbacks need to be solved. Through the analysis of recent data, forest right mortgage loan has been found some features, like the high growth rate, the small size of scale, the high potential of development, the small loan amount. Analyzing from forestry borrowers’ and commercial banks’ perspective, this paper finds the most critical issues are loan availability and lending rates. So these two are chosen to be the starting point of research on forest right mortgage loan. In order to make the results more convincing, common forestry loans are used to make comparative analysis. Dynamic game model is used to study the loan availability, and the outcome of common forestry loans is no loan, while forest right mortgage loan can reach no matter participants are rational or not. Mortgage property changes the results of forestry loans. This paper starts the study of lending rates with analysis of common forestry loans from the security point, using complete but imperfect dynamic game model. Analysis shows commercial banks will set lower lending rates, but they won’t accept this rates level. Then lending rates of common forestry loans are studied from the profitability point, using RAROC loan pricing model. This paper estimates operating costs, cost of funds, cost of capital and risk costs of forestry loans, and focuses on the cost of risk. There are two kinds of risk, including natural risk and market risk. Because of high level of risk, common forestry loans’ rates are too high to be accept. Finally, using RAROC loan pricing model to estimate the rates of forest right mortgage loan, and the level of rates is much lower because of the mortgage property, so it can be accepted by forestry borrowers. However, in order to make higher availability and more rational rates level come true, forest right must become the real mortgage property. Starting from this, some suggestions are made, including making forest rights trading market normalization, strengthening ability of forest rights valuation, strengthening information dissemination, establishing forest insurance, promoting forest rights reserve system and improving the form of forest rights.