Research On Informal Financial And Economic Growth

Informal finance chronically exists worldwide,and have not been vanished by thedeveloping formal financial. The existence of informal finance is not an incidental, but arational choice, under the premise of financial repression,Informal finance’s informationadvantage gained itself a soil. Informal financeal activities have a long history in China,main manifestations would be personal loan, union, underground bank, enterprisefinancing, private equity fund, diversified forms rendered the Informal financecomplexity and concealment.Eastern and western regions differ in economic operation way, informal financeactivities vary interregionally as well. According to the survey, informal financedifference between the east and the west is mainly reflected in financing structure andparticipating degree. In order to analyze informal finance of both regions moreconcretely,a representative province is picked out from each region: ZheJiang provinceand NingXia the Hui autonomous region, then contrast the two provinces over thefinancing structure and the participating degree of informal finance, so as to analyze thestructural features of domestic informal finance.Informal finance not only has the advantage of mobilizing savings, but alsoprovide enterprises with flexible and convenient financial services, so as to improve theefficiency of investment saving transformation and promote economic growth. Privateeconomy such like Small and medium-sized enterprises has a close relationship to informal finance, many small and medium-sized enterprise turn to the informalfinance,when it is difficult to get the formal financial capital support.The concealment of informal finance lead to a indirection upon its scalemeasurement. Based on three methods: the net cash flow of informal finance andfinancing volume, fixed assets investment source, this dissertation conductsmeasurement and calculation upon domestic informal finance scale during a period oftime.As a result, the informal finance is accelerating in its scale expansion,andenhancing in its active degree.This dissertation proves with evidence that, informal finance and economic growthpresent positive effect overall, which not means informal finance is always good: theconcealment of informal finance caused a difficulty for the the financial supervisiondepartment to supervise, and diminished the effectiveness of the nationalmacroeconomic policy; Informal finance occupied part of the funds serving publiceconomy. These deficiencies will be magnified along with economy development,gradually bring about some negative influence upon economic growth and socialstability.The way of informal finance shall be dredged than be blocked and shall berectified to promote economic growth while suppressing the deficiencies.This makes itnecessary that the government formulate some policies to guide it through a path whichis supposed to be formalization of the informal finance.