The Effect Of Financial Interlinkage On Credit Rationing Of Rural Households

The problem of asymmetric information is prevalent in the rural credit market,which makes it difficult for rural households to get loans and formal financial institutions to lend.Because of the characteristics of agricultural production,the loan demand of rural households is characterized by seasonality,abruptness,low amount,high frequence and low density,and the rural households are lack of suitable mortgages and collaterals.The cost and risk of agricultural-related loans to formal financial institutions is too high,but the return is too few,so that formal financial institutions reduce the supply of funds in rural credit market.Facing the conflicts of adverse selection and moral hazard,rural households who are unable to provide effective credit are subjected to financial exclusion.Most of the rural households,especially poor households,still facing unequal financing opportunities and suffering credit rationing.Therefore,this paper provide an effective way to solve the problem of rural households credit,that is set up and clear the brige between the financing of rural households and the lending of financial sector.The financial interlinkage changed the traditional credit model “formal financial institution + rural households” into “formal financial institution + rural intermediary + rural households”,combined with the financial advantages of formal financial institution and the information advantages of rural intermediary,breaking through the institutional barriers of formal financial institutions to deliver financial service like credit to the vast number of scattered rural households,solving the problem of information asymmetry faced by commercial banks when they apply for loans to rural areas,promoting the issuance of loans to the poor,and ease the problem of credit allocation of rural households.The general objective of the study in this paper is to analyze the mechanism of the financial interlinkage to credit rationing of rural households,analyze the improvement effect of rural households’ credit rationing,and explore the innovative modes,operating mechanisms and institutional arrangements of financial interlinkage.Focusing on this,the article is divided into four subtargets: the operating mechanism of financial interlinkage to improve the credit rationing;identifying the types and measuring the extent of credit rationings;assessment of the effect of financial interlinkage;the institutional arrangement of financial interlinkage to improve the credit rationing of rural households.Firstly,this paper takes the asymmetric information theory as the logical core,starting from the asymmetric information governance approach,and combining the transaction cost theory,the social capital theory,professional division of labor theory and financial intermediation theory as theoretical support to construct the theoretical basis of financial interlinkage.Combining with economics theories,the paper describes the three aspects of the financial interlinkage from the responsibilities of the participating parties,the models of financial interlinkage,the internal basis and the theoretical function.Through the signal transmission and information discrimination models,the incentive compatibility constraints and reputation incentives of formal financial institutions for rural agencies,and the cost-benefit analysis of formal financial institution,rural intermediaries and rural households,we analysis that how financial interlinkage solve the problems of information,incentives and transaction costs in traditional credit transaction.To explain how rural intermediaries can communicate information through the credit base with rural households,how to restrict rural intermediaries to fulfill the role of “agent” in accordance with the requirements of formal financial institutions,how to increase the income of participating entities through financial interlinkage,and save transaction costs.Secondly,this paper combines macro statistical data and micro survey data to analyze the status,problems,and extent of credit rationing of rural households,and uses economis analysis methods to study the causes of rural households’ credit rationing.From the macro perspective,the total amount of agriculture-related loans for formal financial institutions has increased but the proportion has decreased,and the loan demand of rural households have shown diversification.The supply and demand of rural credits have not matched.From the micro level,we use the field survey data of 573 rural households in the Guanzhong area of Shaanxi province to identifiy the degree of credit rationing.We use the biprobit model to analysis that 37.63% of rural households are credit rationed,while use the DEM method to analysis of the credit status of rural households,and determines that a total of 44.15% of households are subject to credit rationing.Then,the paper studys the actual improvement effects of financial interlinkage on credit rationing of rural households by comparing the ones who participate and not participate in the financial interlinkage.We take the empirical sample of “formal financial institutions+rural intermediaries+rural households” as model,and analyze 221 rural households participating in this type of financial interlinkage based on the survey data of rural households and cooperatives interview.We use the multi-logit model and multiple linear regression model to analysis the improvement of financial interlinkage to the loan rate and quotas to evaluate the direct effect of financial interlinkage on credit rationing.The results shows that the the quantitative rationing and transaction cost rationing are significantly improved,which is 19.6% and 25.9% respectively,and the amount of loans to rural households increase to 116.8%.The 2SLS model is used to study the financial interlinkage promoting the growth of rural households’ income and the accumulation of funds,which indirectly influence the credit rationing.The impactors of time and loss are used to eliminate the endogenous problem between income and interlinkage,and found that the income of those rural households who participate the financial interlinakage can increase by 34.14%.The financial interlinakge can effectively improve the credit rationing of rural households in both direct and indirect ways.At the end of this paper,based on the results of the previous study,we propose an institutional optimization design of the “formal financial institutions+rural intermediaries+rural households” model to guide future practice.In the conclusion part,we summarized the reaserch results and some deficiencies,which are further improved in the follow-up study.