Study On The Impact Of Whole-village Credit On Farmers’ Credit Constraints

As the long-tail group of financial services in China,when farmers encounter credit from traditional financial institutions,they mostly face serious problems such as high transaction costs in addition to interest rates,being passively disadvantaged by information,and having their capital needs delayed or not met.This situation makes the famer’s credit demand often been marginalized,damaging their economic interests,and hindering the rapid development of agriculture and rural areas.As an innovative way of rural Inclusive Finance,whole village credit reshapes the bank financial service model,effectively connects farmers’ credit capital needs with bank credit capital service and improves farmers’ credit subject status.Can the whole village credit ease the financing problems of farmers or alleviate their credit constraints in rural area ? It remains to be further explored,and this becomes the purpose of this essay.This paper takes a village bank in Guangyuan City,Sichuan Province as the research object.The plight of rural inclusive finance in Guangyuan City,Sichuan Province can be seen as a microcosm of the development of inclusive finance in rural areas in China: with the development of rural Inclusive Finance,the credit needs of some farmers have been responded,but some of them still evince that there are some setbacks : the credit application is rejected,the credit application takes a long time,the credit funds don’t meet the demand and the credit cost is too high.As a prefecture-level city in Sichuan Province,Guangyuan is located on the northern edge of Sichuan,with a rural population of 2224500,accounting for74.4% of the total population,which agricultural population and agricultural development play an important role in Guangyuan’s economy.Village banks,a financial entity based on serving agriculture,rural areas and farmers,are standing on serving to meet the demand for small loans from farmers,successfully filling the gap of financial services in rural areas,and having a special position in rural economic development.This essay analyzes the current credit constraints of farmers,which based on the research into micro data from a village credit of a village bank in Guangyuan City,Sichuan Province。I use transaction cost theory and information asymmetry theory,combined with fieldwork to examine the credit needs of local farmers’ business entities.Then empirically analyze the impact of whole-village credit on credit availability of farmers and its mechanism.I apply Ordinary Least Squares regression model to analyze the influencing factors of farmers’ credit constraints and the role of whole-village credit on credit constraints under the perspective of transaction costs and information asymmetry.The mechanism analysis shows that the whole village credit can improve the probability of farmers’ access to credit by increasing the trust between banks and farmers,reducing information asymmetry;shortening the distance from farmers to the nearest financial institutions and reducing transaction costs are two methods to improve the probability of farmers’ access to credit.Thus whole-village credit effectively alleviates farmers’ credit constraints."Increase trust" and "reduce costs" to promote the whole village credit more inclusive and efficient.Therefore,the whole-village credit is expected to become an effective path for farmers’ long-tail group to achieve rural financial inclusion.Further analysis shows that the whole village credit is particularly helpful to alleviate the credit constraints of farmers with financial knowledge.Therefore,this essay puts forward the following suggestions for different subjects: 1、farmers should accept the credit of the whole village with a positive attitude and become the real beneficiaries of rural Inclusive Finance;2 、 The government should improve the rural financial ecological environment and improve the rural financial laws and regulations;3、The banks should strictly control the risk of granting credit and loans to whole villages and strengthen credit risk prediction,crediting information data system construction.To a certain extent,the research in this paper provides some ideas for financial institutions to better practice inclusive finance,optimize financial structure and grasp the law of development,and develop rural mutual financial platforms.