Research On China's Rural Microfinance Risk And Its Control

Rural microcredit is an important part of rural finance.It has provided strong financial support to the acceleration of peasants' income increase,rural poverty reduction,and balance of urban-rural development.However,rural microcredit has been suffered from extensive pressure and various risks,which endanger the normal operation and sustainable development of rural microcredit institutions.Thus,analyzing the risks of rural microcredits,revealing the causes of those risks,and proposing corresponding risk control measures is of vital importance.Related research would contribute significantly to the control of rural microcredit risks,improvement of rural finance environment and optimization of the agriculture-supporting financial system.This paper defines concepts of risk,rural microcredit and related risks;elaborates the development of rural microcredit in China and reveals existing problems of it.Based on existing literature,this research investigates various risks of rural microcredit and explore causes of those risks.Then,this paper establishes an index system that could analyze risks of rural microcredit quantitatively and applies this index system in experiential research.Finally,this study proposes several risk management measures for different types of risks.After nearly 30 years of development,the rural micro-credit in China has made great progress.However,due to the complexity of the financial environment,the diversity of the types of institutions,the particularity of the loan object,the opening of the interest rate control and the lack of supervision and so on,rural micro-loans encounter a series of risks inevitably,which mainly refer to environmental risk,credit risk and management risk.Environmental risk mainly comes from the dual influence of natural environment and market environment.Credit risk is mainly due to inadequate construction of credit system for rural residents,limited guarantee and collateral and even intentional non-payment and so on.Management risk mainly means the lack of microfinance credit management,process management and recycling management.The rural micro-credit can use Analytic hierarchy process and Fuzzy Comprehensive Evaluation method to construct Index system and quantitative Evaluation Model.By using this method and model,the credit grade of a small loan project is empirically analyzed.Finally,the concrete measures to control the risk of small loans in rural areas are put forward in the paper.On the basis of the effective identification of risk,this paper putsforward the mechanism of risk sharing and establishes the mechanism of risk transfer.This paper suggests strengthening the Construction of Credit Information system,cultivating Farmers' Awareness of keeping Credit,innovating the guarantee way,and increasing the cost of Farmers' breach of contract.This paper also puts forward Perfecting risk compensation Mechanism and strengthening risk Control Mechanism such as Post-loan Management.In one word,this paper aims at providing some theoretical guidance and policy reference for the standardization of rural microfinance and scientific development in China.