Study On Operational Mechanism And Efficiency Of Rural Funds Cooperatives In China

The contradiction of rural financial supply and demand is an important problem of rural financial development in China for a long time, and it has become a difficult issues which constraints the sustainable development of rural economy. In recent years, the government adjusted the access policy of rural financial institutions and lowered a threshold, encouraged the development of new type of rural cooperative financial organizations to promote a diversified inclusive financial services system in rural areas. The Rural Funds Cooperative(RFC) is founded against the above background by subjectivity of farmers and small-scaled enterprises in order to promote the rural economic development through self-serving financial cooperation. RFCs’ practice shows that social capital promotes to create rural credit environment and influences the operational mechanism and efficiency. The innovation and essence of RFCs embodied in the operational mechanism, which has a refining organizational structure and advantage of higher efficiency of internal configuration of financial resources. So it is critical to grasp the operational mechanism and measure the efficiency of RFCs for sustainable development of RFCs in China.The thesis is on the basis of the clarification of Rural Funds Cooperative and made a review of existing literature. The research is implemented based on the discipline foundation of rural cooperative finance theory, financial repression and deepening theory, information asymmetry theory, local knowledge theory, transaction costs theory and social capital theory. By reference of the successful practical experience of rural cooperative financial organization in developed countries, to analyze the operational mechanism and efficiency of RFCs from social capital perspective, then research the operational efficiency and efficiency of supporting agriculture from micro and macro aspects in the operational mechanism as the main line. Then grounded on the above analysis, comprehensively considered of micro and macro study results, made feasible suggestions to improve the efficiency of organization and supporting agriculture by RFCs.The main research conclusions are as follows:First, the RFC is an endogenous demand for financial services in rural areas and also the product of the reform of China’s rural financial system in recent years. It is also a realistic qualitative institutional change. RFCs have typical characteristics of cooperative finance self-organization, which is a special micro-financial organization by satisfying the financial demands rooted in rural community. Social capital impacts the effectiveness of RFCs in three paths: construct rural credit environment, reduce the operational cost or RFCs and increase the financing channels of members. Rural social capital is the most powerful driving force to build rural credit environment by urging members to comply with the financing agreement under the constraints of rural social norms. Social network, social norms and community trust promote the operation of RFCs from different angles. It successfully combined the rural social norms and formal rules, showing the profound power of informal norms in the field of social integration in rural areas.Second, RFC is the innovation of rural cooperative finance in country at present, and constantly being replicated and popularized in practice. Most of RFCs established on the standard of formal RFC to conform to the requirements of the CBRC financial license in a similar way of organization structure and operational mechanism except slight differences. The operational mechanism of RFCs is composed of organization mechanism, operating management mechanism, risk control mechanism and profit distribution mechanism, and in the course of RFCs’ business, the internodes are interrelated and mutual restraint as an organic whole. The reasonable operational mechanism is the key to ensure efficient operation of the organization structure, which determines the inherent skills and operation mode of existence and development of a RFC,and it guide and restrict the decision-making during the process of production and operation.Third, using DEA method to evaluate organization efficiency and empirical analysis of RFCs for multiple inputs and multiple outputs, the result showed that the RFCs have technical and operational advantages. Further analysis found the RFC efficiency is positively related to the scale of the sample, the financial license promotes RFCs’ efficiency growth. Financial license is the official legal documents to conduct financial business, so the formal RFCs have a great impact on the business with stronger authority and credibility. Efficiency of RFCs with specialized farmers cooperative background is lower in actual operation contrary to expectations, and the ones without the support of the specialized farmers cooperative is more efficient. It shows that the factors such as management and technology lead to low efficiency, which relevant to whether the RFC has independent property rights from specialized farmers cooperative, or inadaptability of object converted from agricultural products into currency, thus higher technical requirements needed.Fourth, RFCs efficiency of supporting agriculture demonstrated the rural financing promoting local agricultural economy and improving farmers’ income by independent and compound utility of financing in rural areas. The empirical results indicated that the rural financing, agricultural machinery and fiscal expenditure separately had positive promoting effect of the first industrial added value, gross agricultural production and farmers income, especially the composite of loans and rural fixed assets investment expanded the effect on the agricultural economic growth. Urban-rural dual system in our country separates financial market into a fragmented one from the beginning, the appearance of RFCs gives the communicating possibility of separated zone.