Is Rural Microcredit Companies Easing The Formal Credit Rationing Facing Rural Small And Micro Enterprises

Rural small and micro enterprises, which are important components of China’s rural economy, play antremendous roles in the process of development rural economy in our country.The development of rural small and micro enterprises plays a very important role in increasing employment, promoting economic, social stability and technology innovation, however, the financing problem has become the biggest bottleneck in the development of micro businesses. As the result of the low level of rural economic development, the high rural financial market concentration, the low coverage of formal financial institutions and insufficient supply of rural finance, the rural small and micro enterprises financing channel is narrow. What’s more, the innate character of micro businesses determines that the rural micro enterprises financing channel is not smooth. Because of their own limited resources, information delay, lack of experience, backward in technology and small scale,the anti risk ability is low, at the same time, the demand for funds is difficult to be satisfied in the formal credit market. As a result, the key point of micro enterprise financing difficulty is the the credit rationing caused by unsymmetrical imformation from debtor and creditor. Therefore,China and other developing countries desiderate a new organization system to alleviate the credit rationing problem.Using a sample of 242 rural small and micro enterprises from Huai’an, Jiangsu province, this paper compares rural microcredit companies with formal financial institutions on the credit behavior. It examines the effects on the formal credit rationing of the rural microcredit companies by using the Bivariate Probit model to estimate the lending behaviors of the Rural Credit Cooperatives and the rural microcredit companies.The paper is divided into five parts:The first part is an introduction, which specifically includes the problem of the research, the significance, the methods and innovation and weakness in this article may be inadequate; second part is the theoretical analysis and literature review, to SMEs credit rationing theory of the sort and analysis, and on the existing research on microfinance systematically summarized and reviewed; the third part is a sample of rural microfinance companies and the development of small and micro enterprises in rural areas, through a questionnaire survey way to get samples of small and micro enterprises in rural areas of data, sorting data and sample regional economic and financial situation, rural micro- loan companies and rural development of small and micro enterprises descriptive analysis; the fourth part is an empirical analysis of the rural microfinance company and the behavior of the credit agency. It is the focus of research in this paper, first introduced the model and variable selection, then use the bivariate Probit model of rural credit cooperatives and rural credit behavior of small and micro enterprises were estimated and compared difference between credit behavior; the fifth part are the main conclusions and policy recommendations by the research and analysis, the main conclusion of the study, and this proposed policy recommendations to promote small and micro enterprises in rural areas and rural microfinance company’s development. It is found that: compared with the Rural Credit Cooperatives, the rural microcredit companies relax the rural credit rationing facing rural small and micro enterprise efficiently, in which the quantity rationing and the transaction rationing are more relaxed, while the risk rationing is less relaxed. The rural microfinance companies prefer to lend to the rural small and micro enterprises associated with agricultural, the rural credit cooperatives serve the wealthy rural small and micro enterprise, while the rural microcredit companies serve the less wealthy ones; the microfinance institutions extend their outreach downward, but their customers are still the richer in the sample areas. The rural microcredit companies have positive effects on the formal credit rationing.