Study On The Relation Between Informal Finance And Economic Growth In Rural Areas By Taking Fujian Province For Example

Issues concerning agriculture, countryside and farmers have been the focus of ourgovernment. At present there is a difficult problem that in our rural areas exists thedual financial structure. The farmers and enterprises have to solve the problems offunds through informal finance because the fund supply in rural financial market fromthe formal finance, however, has been decreasing, which don’t meet the demand ofthe development of rural economy. So it makes informal finance grow well in ruralareas. Many theories prove that the informal finance has played an important role inrisk reduction, resource allocation and mobilization of saving and economic growth.Based on this background, the analysis of relationship of informal finance andeconomic growth is helpful for us to use informal finance better and promote thedevelopment of rural economy.This paper discusses the related literature about definition, cause and scale ofinformal finance and the mechanism of informal financial influencing economicgrowth. When I understand the reason and the development of informal finance inrural areas, I analyzed its influence to agriculture, countryside and farmers. Thencombined with the literatures I make use the macro data and estimate the scale ofinformal finance in Fujian. Finally, I analyze the relationship of informal finance andeconomic growth by empirical testing and point out the policy and proposal todevelop the informal finance. This paper can reach the following conclusions:(1) Theinformal finance in fujian countryside exists cointegration relationship witheconomic growth but it is not significant one-way causation.(2) A impact to informalfinance will also give the rural economy growth the same impact.