The Empirical Research On Identification And Affecting Factors Of Rural Households Credit Demand

Over the years, the reform of China’s rural finance has been around the rural financial institutions and system, hopes to establish a multi level system of rural financial system. From the reform, the rural financial markets have produced some positive changes, but the whole point of view, only from the system and the level of the management system reform does not fundamentally change the inefficiency of rural financial market. China’s rural financial system can not meet the needs of the ever changing and developing rural economy. The reform from the supply of rural financial market and the establishment of China’s rural formal financial institutions trends to meet the national preferences rather than the needs of farmers. Meanwhile, because of the low influence of farmers, the financial needs of farmers, especially the loan demand, have not received sufficient attention. In recent yeas, the government has carried out a series of adjustments in the rural financial system, shift the perspective from the demand to deepen the rural financial innovation, trying to fundamentally change the problems in the current rural financial markets, including less financial products, a unitary system financial services, the quality and efficiency of the financial services does not match the needs of development and the farmers diversified financial demand. But from the theory point of view, the domestic research about the demand of rural finance starts lately, some related empirical investigation and analysis of current theory sector of the rural financial demand are still far from sufficient.In this study, we further classify the household credit demand on the basis of precisely definition the credit needs of farmers. Household credit demand will be divided into nominal credit demand and effective credit demand, the nominal credit demand contains the fully satisfied effective demand, partly satisfied effective demand and potential credit demand. Through the survey data from the Direct Elicitation Methodology, the study will achieve the identification of the level of credit demand of households. Second, this research will also focus on the factors of farmers’ formal credit demand, analysis the reasons why household credit demands are not met. Third, this article studies the demand for household credit, particularly the unsatisfied and potential credit demand, explores the positive rural credit innovation, and analysis the direction and path of the innovation based on a typical case of rural credit. Finally, this study will put forward the efficiency of policy recommendations on further enhance the rural financial market services and the efficiency from the view of the needs of the rural financial market.This paper is divided into six parts, main contents and conclusions are as follows:Part1:The effective identification of household’s formal credit demand In this part, the household credit demand will be divided into nominal credit demand and effective credit demand, the nominal credit demand contains the fully satisfied effective demand, partly satisfied effective demand and potential credit demand. Field survey data show that the credit demand of44.55%of the total households can be met,18.15%of the total households did not fully get the loan application or partially get the loans, and the other37.30%of the households have potential demand for credit.Part2:An empirical analysis of determinants of regular credit demandThe result shows that variables including education level and age of the head of household, education expenditure and rural household activities in rural financial market are significantly affect the probability of regular credit demand. Also, we find that age of the head of household, independent ratio, land area, the value of fixed assets for production, the proxy variable for the farmers’understanding of credit contract can significantly affect the expression of nominal credit demand.Part3:The credit innovation based on activating potential credit demandTaking transaction costs, collateral requirements and risk aversion into consideration, rural household will hide their credit demand in current credit market. In this part, we take "Transparent Credit" in Jiangsu province as the typical example. And by theoretical analysis for this innovative credit model, we find "Transparent Credit" can largely relieve the repression factors for expressing the demand for credit, such as high non-interest transaction cost, requirement for collateral and the risk of losing their collateral. As a result,"Transparent Credit" can stimulate potential credit requirements and promote the balance of rural credit market. The future direction of innovation of rural credit market should be solving main problem such as interest bear, credit risk and the transaction cost. So by the innovating of rural financial products and services to effectively reduce the transaction costs and relieve high credit risk caused by nature and market is one of the main directions for credit market innovation.