A Study On The Impact Of Formal And Informal Finance On Poverty Vulnerability Of Rural Households

With the arrival of our country’s building a well-off society comprehensively in 2020,our country has also completed the poverty alleviation goals and tasks of the new era as scheduled.The rural poor under the current standards have all been lifted out of poverty,and all poor counties have removed their hats,eliminating absolute poverty and overall regional poverty,and achieved a victory that has attracted worldwide attention.However,we should also be aware that as our country’s economy enters the new economic normal,changes in the economic environment,adjustments in the industrial structure,and the impact of emergencies such as the COVID-19 epidemic,these potential changes may cause farmers to face many risk events.Under immature conditions,it is difficult for them to cope with the impact of various risks.Therefore,rural households that are not currently poor may fall into poverty in the future,and rural households that have been lifted out of poverty may return to poverty again.Therefore,improving the quality of poverty alleviation,maintaining the results of poverty alleviation,alleviating true poverty and alleviating poverty will be the main tasks of the post-poverty era.As a forward-looking indicator,poverty vulnerability can measure the probability of farmers falling into poverty in the future and reflect the dynamic poverty information of farmers.This can make up for the lack of static poverty information and improve the effectiveness of government policies.Among the many poverty-causing factors,the problem of insufficient capital accumulation of vulnerable farmers and the lack of external capital sources leading to poverty is particularly prominent.Therefore,to reduce the poverty vulnerability of rural households,financial support is particularly important.There are two main ways of financial support in rural areas,formal finance and informal finance.This article will start from the perspective of lending,expressing formal finance as whether or not farmers participate in formal lending,and expressing informal finance as whether or not farmers participate in informal lending.These two types of financial support are the basis for realizing the transition from “blood transfusion” to farmers’ own initiative “blood production”,which can realize the transformation from short-term benefits to long-term benefits.The original internal poverty balance of rural households improves the sustainable development capacity of rural households and reduces the possibility of falling into poverty in the future.Therefore,this paper uses national public survey data to empirically study the impact of farmers’ participation in formal and informal finance on farmers’ poverty vulnerability and its impact mechanism in the context of the rural dual financial system.This article is based on the data of farmers in the China Family Tracking Survey(CFPS)in 2018.First,refer to the methods of existing scholars,use the VEP method to calculate the poverty vulnerability of farmers and use the two-stage method to calculate the income uncertainty;second,take the borrowing behavior as an example,construct an OLS regression model for basic regression,and empirically analyze the impact of formal financial and informal finance on the poverty vulnerability of rural households,and carry out endogenous treatment and robustness test;third,according to the intermediary effect test model,using the Bootstrap method to analyze the rural households’ participation in formal finance and rural households’ participation in informal finance on their poverty and vulnerability;Finally,the heterogeneity regression analysis was performed according to whether the farmer households are poor households and the classification of loan uses,and the endogenous treatment was carried out.The main conclusions drawn from the research in this paper are as follows:(1)Rural households’ participation in formal and informal finance can help reduce their poverty vulnerability,and compared with rural households’ participation in formal finance,rural households’ participation in informal finance has a greater impact on their poverty vulnerability.(2)Both income and income uncertainty are important mechanisms by which formal finance affects the vulnerability of rural households to poverty.In the central and western provinces,income and income uncertainty are both important mechanisms for informal finance to affect the vulnerability of rural households to poverty,but the latter may not have a significant effect in the eastern provinces.(3)From the perspective of the poverty status of rural households,regardless of whether they are poor households,their participation in formal and informal finance can help reduce their poverty vulnerability and have a greater impact on poor households.At the same time,compared with non-informal households,The role of formal finance and formal finance in reducing the poverty vulnerabilities of rural households in different poverty states is even greater.The loans of rural households are classified according to the loan purpose,and divided into housing loans and non-residential loans.Regardless of whether the rural households participate in formal or informal finance,compared to using loans for housing loans,using loans for non-residential loans is more conducive to reducing the poverty of rural households’ vulnerability.In addition,when rural households participate in formal finance,the negative impact of housing loans on rural households’ poverty vulnerability is not obvious,while when rural households participate in informal finance,housing loans have a significant negative impact on rural households’ poverty vulnerability.