Research On Operational Mechanism Of Rural Microfinance In China

As an innovative financial instrument to poor people, the success of microfinance in some regions caused some concern from the developing countries. It is about ten years our country carried out the microfinance, and we are still at the initial stage of development. But the importance of microfinance in poverty alleviation and supporting agriculture has been widely recognized. The creation and essence of microfinance is reflected in the specific mechanisms firstly, so an accurate understanding of the microfinance mechanisms will be the basis to explore the development path of China's microfinance.Firstly, the paper discusses the microfinance mechanisms combining international classical model with three parts: target customers, microfinance organization and the basic principles of operation of microfinance mechanisms. The principles of operation in new arrangements such as custom-targeting mechanism, group-lending mechanism,dynamic incentives mechanism are analyzed in detail. The explanation of its contribution in solving the problem of asymmetric information is given, too.Based on the theoretical framework, the paper gives the analysis of the actual operation of microfinance mechanism in three parts mentioned before.In the customer side, the paper analyzes the characteristics of financing demands and the poverty composition of the target customers with the public data. Then it discusses the practice of the target-customers choice in China's microfinance, including the different choices of different microfinance organization in poverty degree and gender of the farmers.Because of the different operation system between the different organizations in China's microfinance, the paper discusses the organization and the basic principles of operation of microfinance mechanisms together. First, the paper analyzes the operation system of formal financial institutions in microfinance, introduces the formal financial institutions in microfinance, and gives the operating characteristics of formal financial institutions microfinance through the analysis of rural credit cooperatives with a more specific and visual case study of a little institution in Hunan. Then it discusses the non-financial institutions in microfinance. There are many non-financial institutions who carrying out the microfinance in China. The paper summarizes their types, purposes of the operation and features of funding and so on, and analyzes the flexible mechanism of non-governmental organizations importantly. After that, through the comparison of the operating theory in our country and classical one, combining the characteristics of the financing demands of China's farmers and their current situation of poverty, the paper summarizes several problems in operation of microfinance in China. Finally, based on the former analysis, the paper gives some advices to our microfinance about customers and institutions in micro-level and macro-level.