Research On Microfinance Development In China Based On Welfare Economics

This paper, based on the perspective of walfare economics, points out that financial resource allocation imbalance leads to unfair and improper allocation, non-predominant industry and people out of target group by commercial cash, whereas microfinance is not only complementary to the miss of financial resource allocation, but an innovatieve method of financial poverty-aid as well. Welfare economics is the theoretical basis for the origin of poverty-aid finance.Since equality and efficiency are the two social goals for welfare economics to seek, welfare economic system aims to help the impoverished to remedy the unfairness and inequality caused by maket economy by means of social aid and relief etc..whereas, traditional method of relief leads to low efficiency in the process of poverty-aid, but microfinance,under the viewpoint of contract restraint, acts as a brand new financial poverty-aid means to increase the opportunities for the poor to enter the credit market, train and improve the awareness and ability for the poor to participate in maket competition, thus, it agrees with the institution arrangements of market economy better and helps to improve allocation efficiency of poverty-aid cash.Microfinance is a effective means to get rid of poverty, which has achieved rapid development in a number of developing countries, for instance, Bangladesh, Bolivia and Indonesia etc. Chinese government introduces the microfinance to help the poor, but it, meanwhile, brings about a lot of problems such as poverty targeting deviation, unstable cash source and imperfect management system etc, which is possibly harmful to the sustainable development of microfinance. In China, financial resource allocation makes farmer and small firms not share in financial resource fairly because of urbanization and nationalization bias caused by systematic reason. To solve the imbalance of systematic financial resource allocation and reduce the gap between the poor and the rich, it is necessary to persist in the original idea to help the poor by microfinance, thus, microfinance under the guide of welfare is relatively suitable for the Chinese situation in socialist system, but it cannot impose high interst rate to avoid increasing the burden of the poor.Because low income group and the poor will be a huge group in a longer term in China, developing microfinance will have a huge market demand. Establishing microfinance bank to serve the poor can not only solve the existing problem in current microfinance management system, but aslo avoid deviating from the target customer and raising the stable cash source by specialized bank. To realize the microfinance sustainable development, it is necessary for us to enact relative laws and enforce regulation, thus, we ought to construct a regulation system for microfinance institution.