Study On The Development Of Village And Town Banks

Rural finance has always been the weak link in the financial field of our country. With the introduction of a series of national policy that benefits the agriculture, the rural economy has made considerable progress since the new century, and the demand for rural finance has changed greatly. The imperfections of the rural financial organizational system, the inadequate financial competition, the outflow of funds in rural areas, the difficulty of farmers’ in obtaining loans and other issues restrict the development of the "three-dimensional rural issues" and the process of agricultural modernization.In order to realize the Chinese Communist Party put the third plenary session of the construction of a rational division, investment diversification, and the perfect function of rural financial system target.The new round of deepening the reform of rural credit cooperatives began in2003. In order to achieve the goal of building a rational division of labor, diversified investment, fully functional Rural Financial System, which was proposed on the Third Plenum of the17th Communist Party of China Central Committee, it has launched a pilot program of village banks, finance companies, rural fund cooperatives in Sichuan and other5provinces since2007. As a new rural financial institution, the Village Bank reforms the rural financial system from the incremental aspects, introduces competition mechanism to rural financial market and thus helps to improve the rural financial system.After five years of practice, it has been proven that the Village Bank has the strongest vitality among the three new rural financial institutions. At present, most village banks initially achieved the objective of commercially sustainable development. But it also faces issues as difficulty in attracting deposits, smallness in the scale of operation, weakness in the anti-risk ability and etc.How to make village banks keep commercially sustainable development, while to ensure the experimental work does not deviate from the original direction? This thesis points out five aspects of this issue, through empirically analyzing the progress and effectiveness of the formation of village banks all over the country, and the development status of village banks. Based on these, the thesis also proposes five aspects of policies to help village banks achieve the sustainable development, so that they are able to play a better role in support of the development of "three-dimensional rural issues" and small-micro enterprises.The thesis is divided into six chapters. The basic structure is as follows:The first two chapters are the introduction, and list some of domestic and international literature. The sections describe an overview of the experimental work of three new rural financial institutions, analyze the foreign research profile on community banks and village banks, and introduce some domestic research results on the sustainable development of village banks.The third chapter analyzes the background of the experimental village banks, and introduces the progress and effectiveness of the formation of them.Chapter four conducts in-depth empirical analysis on the development status of Village Banks all over the country, from the type of the originating bank, structure of property rights and corporate governance, equity size, economies of scale, profitability, and business risk six aspects.The fifth chapter analyzes five issues village banks facing while keeping commercially sustainable development:lack of social credibility and difficulties in business development; some village banks deviate from the market position, and locations of agencies are departed from the original intentions; irrational structure of property rights, and the increasing equity scale; corporate entity status is nominal and the company is not sound legal; operational risks can’t be ignored and the ability to resist risks is low.The last chapter proposes policies, from five aspects, to keep the commercially sustainable development for village banks:adhere to the sponsor system that business is initiated by the good banking institutions, and rationalize the relationship with the village banks; strictly control in which county to open a new village bank, and stick to the market positioning that service the "three-dimensional rural issues" and the small-micro enterprises; establish a modest sized capital, and build a diversified structure of property rights; set up mutual checks and balances mechanism, enhance the effect of corporate governance; strengthen supervision and prevent risks.The innovations of this thesis are as follows:Firstly, it conducts in-depth empirical analysis on the development status of Village Banks, from the type of the originating bank, structure of property rights and corporate governance, equity size, economies of scale, profitability, and business risk six aspects. Together with reality examples, the thesis identifies five issues village banks facing while keeping commercially sustainable development.Secondly, it analyzes the economies of scale of village banks and carries out empirical research on the breakeven point.Thirdly, it puts forward practical policy recommendations on fostering village banks and the commercially sustainable development of them.The disadvantage of this thesis lies in:The cultivation systems and development models of village banks are still to explore and improve. It’s not easy to collect complete data of national village banks that the analysis of village banks’ development status is not comprehensive and deep enough. And because of the long-term work in the actual department and limited personal research capacity, there may be some loopholes in quantitative analysis and qualitative analysis of village banks.