Research On The Effect Of Rural Informal Finance On Poverty Reduction In China

By the end of 2019,China's poverty population were expected to reduce to 5.51 million.If the target of poverty eradication is completed by 2020 as scheduled,China will basically eliminate the problem of absolute poverty.However,the resolution of the absolute poverty problem does not mean the end of the poverty alleviation work,but the more important phase of poverty alleviation work,that is,the phase of solving the relative poverty problem.There are still some rural areas in our country where the problem of absolute poverty has not been solved.There are a large number of people who have just got rid of absolute poverty in rural areas,and the problem of relative poverty is even more prominent.In rural areas of China,financial poverty alleviation is one of the most effective ways to alleviate poverty.However,the credit rationing policy implemented by rural formal finance cannot meet the financial service needs of most peasants.And the rural informal finance rooted in the rural society just makes up for the “absence” of formal finance in the rural financial market.The flexible guarantee mechanism,lower borrowing threshold and diversified business services of rural informal finance can meet the needs of multi-level financial service of the vast majority of peasants and help the peasants out of poverty.However,as China's rural informal finance relies on geography,kinship and business relationship,its development of business scale also get limited.Being outside the scope of the national regulatory system has also led to its credit risk,survival crisis and other problems.Therefore,China's rural informal finance has a limited effect on the poverty reduction.Based on the data of China's household tracking survey in 2018,this paper empirically analyzes the effect of China's rural informal finance taken on rural poverty reduction by constructing Probit econometric model by setting three poverty line standards: absolute poverty line,relative poverty line standard 1 and relative poverty line standard 2.And for further study,these three poverty line standards have been applied into the analysis of regional differences—the whole country is divided into eastern,central and western regions—to analyze the difference in the effect of rural informal finance on poverty reduction and explains the reasons.Through data analysis and empirical tests,this paper draws the following three conclusions.First,the informal finance in rural areas of China has a significantly positive impact on peasants' poverty alleviation whether under the absolute poverty line or the relativepoverty line.Second,compared with absolute poverty,informal finance in rural areas of our country has a more significant poverty reduction effect on peasants' relative poverty reduction and helps solving the problem of relative poverty in rural areas.Third,the poverty reduction effect of informal finance in rural areas of China has regional differences.In eastern rural areas,the effect of informal finance on peasants' poverty alleviation is not significant under absolute poverty line standard,relative poverty line standard 1 or relative poverty line standard 2;in rural areas of central China,informal finance has the most significant impact on peasants' poverty;in western rural areas,informal finance positively affects the poverty situation of peasants under absolute poverty line standard and relative poverty line standard 1,but has no significant impact on the poverty alleviation of peasants under relative poverty line standard 2.According to the theoretical analysis and empirical results,the paper puts forward policy suggestions based on the overall empirical results,regional differences and poverty reduction mechanism of rural informal finance respectively,so as to scientifically position the rural informal finance,provide reference suggestions and improve the scientificity of relevant decisions in the next phase of solving the problem of rural relative poverty.