Briefly Analyze Microcredit In The Less Developed Western Region

Microcredit, also known as miniature enterprise loan or micro loan, is called by foreign countries initially. Later on, our country introduced this co ncept and translated to the current name. Microcredit was recognized as loa ns for poverty alleviation opening to certain farmers and it was considered t o be the most efficient way to alleviatepoverty. However, along with its gra dual development, microcredit has played more and more important role of finance. As a result, the concept has also developed gradually; the microcre dit of rural credit cooperatives (RCC) is resulted by performing loan market ing. Thus, the microcredit of peasant household possesses characteristic of fi nancial markets and business activity.The traditional concept of developing economics considered there is gen erally vicious cycle of poverty existed in developing countries and less deve loped areas. However, the root cause of vicious cycle of poverty is the lack of funds. Therefore, the fund in less developed western areas is the key fa ctor to end the vicious cycle. As a result, the development of microcredit i n western area has great practical significance. The reasons included:1) pro viding an efficient solution to lack of funds in production and administratio n; 2) improving farmers'income; 3) promoting financial market in rural are a.The development of microcredit is beneficial to increase scope of busin ess and profit of trade of RCC. Moreover, it will not only help farmers sol ve the financing problem, but also correct the direction of management of RCC. As a result, RCC improved its competitive strength and rural financia1 market has also been promoted.Microcredit not only plays important role in the development of rural fin ancial market for RCC and farmers, but has great significance of increasing farmers'income. Therefore, it is necessary to provide a solution to the ana lytical study of microcredit in less developed western area. The method of this research is mainly based on empirical approach. Dur ing year 2008 to 2009, a questionnaire survey was conducted among 300 fa rmers and retrieving 280 in Zhenyuan county, Gansu province. Based on sta tistical analysis and interviewing six towns in the county, a great deal of a detailed, first-hand account was obtained. A lot of information was obtained by means of investigating RCC, analysis of balance sheet and income state ment of county union and symposia. The method of this research mainly fo cused on the demand characteristic of farmers'microcredit and the supply o f microcredit in local RCC. By use of survey data as well as analysis of th e currently existing problems, a solution will be provided in this thesis.This thesis includes five parts. The first part is literature review on micr ocredit, the development of microcredit in rural area of foreign countries an d its evaluation. The review part focused on the theory of microcredit, espe cially the currently popular viewpoint. The welfarism and institutionalism mi crocredit are two major types according to the main stream of classification. Grameen bank represents welfarism, while BancoSol is stand for institution alism. Institutionalism micro-credit is the mainstream school nowadays. It n ot only pays close attention to the goal of social developments but also lay s emphasis on the demand for development of the institutions themselves. With regard to the development trend, commercialized operation of microcre dit and normal financial institution entered the realm are considered to be t he trend of development. It is more competitive for normal financial institut ion to develop microcredit than conducting micro-credit for poverty alleviati on in poor rural area in China, probably due to the normal financial institut ions have strong financial support-systems, convenient reimbursement, scienti fic credit rank system, high personnel quality and lower costs of loans.The second part mainly introduced the development course and activatio n mode of microcredit and the characteristics of finance development in the less developed western region. The microcredit undergone three phases of development and now is at the third stage. The participation of normal fina ncial institutions and the key role of RCC in rural microcredit is the princi pal character of current stage. Organized and implemented by government, r elying on the international community assistance, performed by RCC and s mall-loan companies are typical development modes. Thus, the characteristic of finance development in the less developed western region are informal and normal financial institutions coexisting, RCC is the main force to serve rural financial institutions, single financial service species and the diversific ation of microcredit.The third part analyzed the peasant households' financing demand based on questionnaire. This section begins with the investigation of the farmers' fundamental state and then analyzes the relationship of the demand of micr o-credit with income level and the borrowing scale with educational level. T his part aims at the characteristics of western peasant household credit beha vior:the scale and general status of funds; the desire of peasant household credit behavior; the farmers'selection of loan rate and credit terms; the infl uence of credit period and repayment schedule; analysis of the motivation a nd credit of loan; analysis of saving behavior; performance analysis. Base o n these results then make a conclusion. The investigation regions need a gr eat deal of credit demand but farmers have different level. There is a small-scale demand tendency but the purpose of most farmers is the same. There are some paradoxes:the diversity of credit demand in quite a few of farm ers and the loans provided by RCC; requirement on credit period; loans for production and living. Furthermore, the microcredit could satisfy the traditi onal planting areas but could not support high-efficiency agriculture, livestoc k-raising and so on. However, the joint guarantee loan meets obstacle and a s a result, it could not satisfy the farmers need much money.The fourth part mainly focused on the analysis of the financial stateme nt of rural credit cooperative unions of the counties and then found the pro blems encountered in RCC. The advantages of carrying out microcredit by RCC were obtained by analysis of national policy and the characteristics of RCC. The major existing problems in rural credit cooperatives farmers' mi crocredit business are lack of motion because RCC mainly pay its attention to large and long term loan. Moreover, rural economic restructuring in wes tern undeveloped areas has great change, that is, most farmers undertake liv estock breeding, dicker or a sure scale agricultural production scale. Therefo re, the paradox is generated between the providing and requirement. The ass et-liabilities of RCC showed that short-term borrowing occupied a larger pro portion while middle and long-term is much less. The analysis of profit and loss revealed that interest income occupied a large portion of operating inc ome and intermediary business is limited. As a result, financial innovation i s not enough. It is also confused that the operating expenses is much more than interest expense.In view of these realities, the fifth part puts forward the countermeasure s and proposals. These included:1)the insisting on market-based, reducing government intervention, differentiating the function of government's poverty alleviation and micro-credit; 2) the completing of tenure system, establishin g the efficient corporate governance and founding standard internal control a nd external supervisal mechanisms; 3) promoting the innovative of products based on in-depth understanding the nature of microcredit; 4) developing str ongly in the center business and improving its proportion in business incom e.