A Study On The Application Of "Red Credit" Loan In Rural Credit Cooperatives Of Yunnan Province

Eliminate poverty is one of the most significant issue in Yunnan Province during the 13th Five-Year Plan for Economic and Social Development nationwide. With the implementation of policies to increasing financial support for agriculture, rural areas and farmers at the national level, Yunnan Rural Credit Cooperatives started to provide a new credit loan for grass-root party members in 2012, which is named "Red Credit Loan". Red Credit Loan is not only a useful addition to the microcredit family with the institution, but also a new pilot instrument to eliminate poverty through financial manners. However, since the Red Credit Loan is still in the preliminary stage with a very limited time to be understood thoroughly, there is not a systematic review and analysis to reveal the function and evaluate the effect of it. Therefore, this paper is a case study focusing on the function of the Red Credit Loan. Relating to theories of microcredit and using statistics, the paper will find out what works and what does not; discuss the reasons and make recommendations for the future, which also helps with decision making at work.By survey grass-root party members and local individuals of 6 counties, the paper consists of three parts. First, using multivariable linear regression analysis, the author reveals that Red Credit Loan has had significant positive effect on increasing the income of grass-root party members and local farmers. Second, according to the statistics, the author summarizes the general problems with the Red Credit Loan, such as insufficient promotion, mismatched approval criteria and the purpose, operation inefficiency, weak risk management and poor post-loan supervision. Third, based on findings, this paper relates theories to practices and makes recommendations to solve the problems mentioned above.What innovative in this paper is that it is the first study at the micro-level to analyze the application of the Red Credit Loan, of which the findings have some reference values for practices in future. In addition, it can also shed some light on microcredit assurance and collateral innovation when applying financial tools to eliminate poverty. The major limitation of the paper is sampling. Due to variation of the service providing time among counties, the author selects those counties which provide the loan for a longer period of time and with a bigger accumulated balance than the others.