Reasons And Impacts Of Emerging Rural Informal Finance In China

After the reform and opening up, along with the development of rural economy and the demand of capital, the scale of informal finance in rural is expanding. With the new rural construction, how to treat and play the role of rural informal financial on rural economy, and how to make appropriate policy has become a very practical topic.There are many researches achievements in rural informal finance worth learning both at abroad and home, which include explaining the reasons of why informal finance rises in rural China from the perspectives of financial restraint, asymmetric information and other factors; commenting the influence of informal finance in rural China to economic development; analyzing the trends of rural informal finance and so on.Based on the above researches, the paper discusses the status, form and characteristic of rural informal finance, and finally discovers that the scale of rural informal finance showed the growing trend , not only the form of rural informal finance increasing (eg. private lending, hehui, underground banks),but also having characteristics of regional, high rates, easy to operate.In order to explain the status of rural informal finance, the paper studies the reasons of rural informal finance rising from the perspective of system economics. First, seen from the supply and demand of rural financial system, the reasons of rural informal finance rising are not only arises from the shortage of rural financial supply, but also because of farmers and small enterprises' demand of rural informal finance from. Second, rural informal finance owns unique advantages in gathering information, monitoring costs and insurance costs compared with formal finance Third, from the perspective of culture, factors such as family, land, traditions and so on are the important reasons.Based on above theoretical analysis, this paper uses the data from rural fixed observing and the related statistics to estimate the amount of the rural informal finance from 1995 to 2006. On this basis, according to the growth rate of the income of farmers, per capital loan of farmers and per capital income and other variables, the paper uses the econometric model to test the rural informal financial impact on the income of the farmers. It turns out that the informal finance in rural not only play a significant role in improving the income of the farmers but also have better efficiency than formal finance. Furthermore, the survey of BinZhou City validate that the informal finance in rural areas play an important role in the rural economic development.Besides, on one hand, the paper learns the experience and lessons from countries which have similar background on politic, economics and culture, on the other, the paper put forward the policy on rural informal finance when the macro environment such as market-oriented interest rate, deposit insurance system and the micro-policies are considered.