The Study On The Use Of PEARLS System In The Performance Evaluation Of Rural Credit Union

Rural credit union is the most important financial institution that supports on the development of rural economic in China, it shouldered the important task to support the development of agriculture,rural areas and peasantry. With the reform gradual progress on rural credit union, the development of rural credit union in China have made great progress in various regions , the basic conditions of rural credit union have a lot of improvement. A scientific and rational evaluation of the performance is one of the necessary conditions to maintain healthy and rapid development of rural credit union. The performance evaluation activity is still in the state of backwardness, so the performance evaluation system can't perform its function of management control and information systems. Therefore, rural credit union has an urgent need for a performance evaluation system which in accordance with the feature of rural credit union in China. PEARLS system is designed by the WOCCU(World Council of Credit Unions), which is the latest,most authoritative performance evaluation system, includes risk assessment and evaluation of operational effectiveness, is the true performance evaluation system for rural credit cooperatives. The study on PEARLS system is very significance for rural credit union performance evaluation in China.This paper detailed description of the PEARLS system, comprehensive analysis of the composition of the PEARLS system (including the basic system and the core system) and its advantages. PEARLS system has many advantages such as requirements less basic conditions; accord the characteristics of rural credit cooperatives; including more content; a broad group user; it can use in the performance evaluation of Rural Credit Cooperatives in China .This paper applies factor analysis to give a demonstration on the sample that make up with the aggregate data for the rural credit unions in a province during 2005 to 2007.In the empirical analysis ,principal component analysis is used to extract factor, it extracts 4 factors. The rate ratio of variance of factor with the total variance is the weight factor of the total score. Through the practical application of the PEARLS system, the paper analyzes the current development and problems of rural credit union in China.The results showed that the performance of rural credit union in the past three years had improved, it that the reform has been effective, and the development have a good trend; but the overall situation is unoptimistic; especially in profitability and growth capacity still have a big gap between the international levels.