Study On The Effect Of Social Capital On Venture Financing Of Farmers

Farmer entrepreneurship is a progress to the closed agricultural modes, the basic driving force to accelerate urbanization in rural areas, an important carrier to accelerate the rural industrialization, and an important force to improve ownership structure and enhance the vitality of the society. Thus, guiding farmers to start a new business is of very great importance for increasing farmer revenues, realizing the shift of surplus rural labors and coordinating the urban and rural economic development.However, the problem of financing has become a bottleneck restricting farmer entrepreneurship. Social Capital could overcome the information asymmetry, lower transaction costs and promote trade and so on. The traditional Chinese rural society is a blood-centric acquaintance society, so the financing of the farmers have strong social characteristics. Thus, this paper tries to study venture financing of farmers from the perspective of social capital by the survey data of entrepreneurial farmers in Jiaxing, Zhejiang Province, and explore the basic funds deployment capabilities of farmers'social capital in their entrepreneurial process. It is of great significance to solve the problem of financing, thus promote farmers to start new business.Based on this, this paper firstly reviews the literatures about the social capital and credit theory. Secondly, according to the actual situation of farmers venture financing in China, the paper constructs an empirical analysis frame about the effect of social capital on farmers venture financing. Finally, by the survey data of entrepreneurial farmers from Jiaxing, Zhejiang Province, the paper does an empirical study. The results show that, the initial venture capital of farmer entrepreneurship is at a low level. The venture capital is mainly from its own funds, and the borrowing part of the funds are mainly loans from relatives and friends, small part of farmers have been get loans from banks or venture credit. The close contact number of friends, network difference, and trust level of entrepreneurial farmers has a significant positive impact for them to get informal credit. And the close contact number of friends, the number of relatives and friends in financial institutions, and trust level of entrepreneurial farmers has a significant positive impact for them to get formal credit.Based on the empirical results above and in order to improve the availability of informal and formal credit for entrepreneurial farmers, the following points are given. First, farmers should pay attention to build their social capital. Second, the government should actively build a platform for entrepreneurial farmers to build and enhance their social capital. Third, financial institutions should actively integrate the social capital to promote formal financial development in rural areas. At last, government should increase farmers' formal venture capital supply.