The Research On The Informal Finance Based On The Contract Theory

Since the end of 1970's,along with the graduate and continuing development of China's economic structure reform, a gap between financial supply by the normal system and financial demand of all social fields has occurred and unceasingly expanded, which, as a matter of fact, provides informal finance with a cause as well as impetus for its formation and expansion in China.The formation and expansion of China's informal finance can be studied by different economic embranchment. Firstly, looked at from social economic background, informal finance was a unique result of the period the previous social system transferring into the new one in China. Secondly, analyses according to system economy. Due to the true existence of financial depression in China, the compulsive transition of financial system brought villages, middle and small enterprises and collectivistic enterprises huge financial needs, which could not be satisfied by the financial supply of the normal financial system. This impelled those villages, middle and small enterprises and collectivistic enterprises to make up some other market-friendly and profitable system. Its diversity in form and flexibility in financing mode nicely met the system desire, and thus informal finance began to grow up in China. Lastly, analyses from the angle of information dissymmetry. Due to regional, vocational or kinship reasons, it is relatively easier for the lender of informal finance system to know about the borrower's credit condition, income, and ability to pay off, which is helpful for avoiding or reducing all kinds problems brought by information dissymmetry. On top of that, both parties of informal finance have a more frequent contact, and it is easier for the lender to acquire information about the borrower. Thus, in monitoring the usage of the loan, the lender may relatively be sure with the possibility that each repayment shall be paid on time; otherwise,the lender may take some measure. It is thanks to the advantage it has in resisting information dissymmetry that informal finance came into being and gradually developed on this land. Just because disadvantages of informal finance will bring harmful influence upon the stability of China's financial order, sound progress of the financial market, and the execution of national policy in this industry, some persons claim to restrain informal finance. However, to restrain is infeasible and it will only make informal finance more concealed and growing in the direction of gray finance or even black finance, so that governmental department still can not control and supervise it. Therefore, the best way to treat it is to regularize it, put it under government control and supervision, and lead it by necessary methods into a right path.