The Research To The Rural Finance

With continuous improvement of the economic since the Reform and Opening up in our country,the rural economy has been in a relatively weaker condition compared with city economy. In order topromote the construction of new socialist countryside, a rural financial system which can provide funds andstrengthen the security is needed. But there exist problems in China such as capital shortages in rural areasof China at present.After investigating the rural household lending activities, this paper analyzes theformal and informal finance and finally provides some advice to develop the rural economy and prosper therural financial.In the investigation of the rural household lending activities we can find: farmers have strongrequirements, but formal financial institutions can’t fully satisfy their needs, otherwise, private lending isflexible, simple and can meet the diverse needs of households. So the private lending becomes the mainchoice and plays an important alternative role for the formal financial.The private finance have developed in China for thousands of years of development history, but itcan’t fully develop after from the China was founded because the problems of the financial system. Withthe growing demand in the rural financial market and the advantage of getting effective information, theprivate finance had gradually developed until the Reform and Opening up. Although in some cases itsinterest rates is higher than the normal institutions’, but it uses flexible ways to meet the demands.But private lending has many problems, such as high risk and the limited of the regions, thereforeits development must be in the rational expanded boundary and need government’s intervention. Throughthe analysis to some measures for the private finance and three types of financial institutions, we found that there are still many restrictions although the country gradually allowed private capital into financial fields.On the other hand, through the analysis to the formal financial organization in the countryside,we find that there exist many problems. They are influenced by the system restrictions and can’t providefinancial services which can fully satisfy the household’s demand as modern financial enterprises. But atthe same time we should know that the formal financial institutions support the peasants’ lives in theregions where many commercial financial institutions are reluctant to set foot in. Therefore, what weshould do is reforming these institutions and developing their own advantages to give a better service to therural economy.So the first is reform the existing rural financial institutions, such as to improve and deepen thereform of rural credit cooperatives, develop the new rural financial institutions and promote other financialinstitutions in the countryside. At the same time, the government need to take the responsibility to changethe private financial from a free development form to a formal institution which is also adapt to the ruralfinancial actual conditions.