The Obstacles And Development Path Of Rural And Town Bank

Rural finance, as an important part of Chinese financial system, substantially contributes to the development of countryside, agriculture and farmer. It is a significant part of inclusive finance as well as for people’s livelihood to strengthen rural financial markets, widen and deepen rural financial service. However, since the weak development conditions of countryside, agriculture and farmer as well as risks related to rural financial market, our rural financial market has been strictly restrained and its potential hasn’t been efficiently developed. Rural banks together with micro-credit companies and rural mutual cooperatives mushroomed in China recent years, which further enrich rural financial service entities and inject strong vitality into rural financial market. Meanwhile rural banks are facing lots of difficulties as increasing competition and a series of constrains as to the launch and establishment. It becomes an important issue on how to regulate the development of rural bank, stabilize rural market, and effectively fill service vacancy of regular financial institutions. Especially what influence it will bring to rural banks and rural financial markets in western underdeveloped provinces when the relaxation of private banks funding and permission private capital to set up rural bank, which deserves our attention.Based on the current practice of our rural financial market, this paper is dedicated to analyze of the background, operating model, main functions and obstacles of rural bank, compare with the practice and models of rural banks across the whole country, deeply focus on the establishment means and main problems facing rural banks. Especially through case study of Ningxia, the paper concentrates on obstacles facing rural and village banks in underdeveloped provinces and feasible development path. Besides, combined with experience of mature rural banks and the historical opportunity of allowing private capital to launch and set up banks, the paper aims to put forward suggestions on how to establish rural banks and advance its stable development in undeveloped provinces. Employed with qualitative description and literature review, the paper introduced the background and significance, defined the relevant concepts, and summarized domestic and abroad research contributions and findings on this topic. It reviewed the history and current situation of our rural financial market, especially the current development of new types of rural financial organizations such as rural bank and rural mutual cooperative. As a case, the paper investigated the developments of the three new types of rural financial organizations in Ningxia, including the main models and obstacles faced. It also theoretically analyzed the interactions between private bank and rural and village bank and explored the possibility of their combination. In the last part the paper summarized the main conclusions, put forward advices on how to advance the development of rural bank and let it play a bigger role in serving the development of rural economy, and discuss how to deepen this study.The main conclusions of this paper are as follows:(1) Rural and village bank is the objective need for the development of rural economy in Ningxia, which brings meaningful benefits for the development of inclusive finance in rural areas.(2) Although the overall development trend of rural banks in Ningxia is good, there still exist lots of problems facing its actual development process, such as the relative small scale of financial resources, incomplete financial factor markets, underdevelopment of direct financing, uncertainty of sustainable fast growth for credit, unbalanced distribution of financial resources among areas, relatively underdevelopment of financial services in the middle and south areas of Ningxia and so on.(3) Transformation into private banks is the development target and direction of rural banks, the combination of both can enrich the types of rural financial service institutions and play significant role in satisfying the financial needs of small and micro business as well as other rural entities.(4) Proposed suggestions on how to advance the healthy development of rural banks improve its service ability and brand influence, really function to activate the rural financial market. The suggestions detailed as follow: accurately position the rural and village bank, implement moderate regulation model, strengthen financial policy support, implement deposit insurance, improve its pricing ability and credit management, provide payment and settlement means.