Micro Credit Corporations: Mechanism And Efficiency

Providing financial services to peasants and rural enterprises is an important issue to be resolved in China's rural economic development. In recent years, the formation of Micro Credit Corporations has supplied a new way to solve this problem, which is an innovative try in China's micro credit development.Based on the theory of rural financial market and practice of micro credit abroad and domestic, this thesis firstly discussed the theoretical and practical background of Micro Credit Corporations in China, and then introduced its development now. After that, we interpreted the internal mechanism by which Micro Credit Corporations run smoothly and efficiently from the contact of the government, Micro Credit Corporations themselves and their target customers. At the same time, we made a detailed analysis on the incentive and restraint mechanisms which Micro Credit Corporations are facing with, as well as the incentive and restraint mechanisms for customers from Micro Credit Corporations as suppliers in the rural credit market. Besides, we evaluate the efficiency of the Microfinance Companies using the related theoretical mode. Finally we indicated the inadequacies of the mechanisms and proposed some corresponding policy recommendations.This study found that the establishment and development of Micro Credit Corporations in China have alleviated the main difficulties in its rural finance market to a certain extent, but there are also some outstanding problems. Firstly, Micro Credit Corporations were positioning themselves in the lack of clarity, the regulatory body is unknown, and there is both offside and absence. Clear positioning of Micro Credit Corporations is the key to solve this problem. Secondly, because of narrow sources of funding, liquidity problems have seriously restricted the long-term sustainable development of the Micro Credit Corporations. Thus, the government should relax the financing of Micro Credit Corporations and other issues in certain concessions. Thirdly, the internal management mechanism should be perfected by optimizing the shareholder structure and internal governance structure of Micro Credit Corporations, in order to establish effective internal incentive and restraint mechanisms. Finally, although the core mechanism of micro credit, group lending mechanism and incentive mechanism in the form of successive loans helped to address adverse selection and moral hazard problems in the rural credit market, but there are also needs to combine them with the local environment changes in order to constantly innovate and improve.