Research On Microcredit Business Of A Rural Commercial Bank

Finance is now regarded as the "blood" of the modern economies, since finance supports and facilitates all the industries. With the development of economy in rural area, rural finance has become increasingly important, especially on flourishing economies in countryside and increasing the income level of farmers. However, China’s rural financial market is still at the primary stage, which means that most financial institutions such as rural credit cooperatives and rural commercial bank are small-scaled. The types of business are also concentrated on microcredit. Due to the small scales of banks and microcredits, the rural financial institutions are confronted with great credit risks. Therefore, the research about microcredit of rural financial institution tends to be more and more necessary.City A, located in Henan Province where agricultural industry is well developed, has a premier economic status and high level of residential average income. In this city, A rural commercial bank is derived from local rural credit cooperatives that have close connections to local agricultural industry. Hence their microcredits are reprehensive to study. This paper mainly studies microcredit of A rural commercial bank. Firstly, it has a brief introduction about A rural commercial bank. The bank implements three management strategies, which are localisation, increasing the coverage rate and focusing on rural financial market. A wide range of microcredit products such as Golden Swift Credit have been developed in accord with strategies. Nevertheless, this article points out there are several problems of microcredits business. For instance, the amount limit, due time and interest rate of microcredit are not well established; the credit ranks are not strictly evaluated; the risks of microcredit are diversified; the quality of staff is comparably low and lacking of sustainability. These problems could have negative effects on the development of microcredit. In order to resolve these problems, thesis proposes pertinent measures combined with the features of rural commercial bank. For example, innovating more types of microcredit business, setting flexible due time and account limit, setting more strict operating system of microloans, establishing " microcredit risk compensation fund", reducing transaction tax and value-added tax, improving the structure of microcredit risk compensation by supporting non-profitable agricultural insurance, increasing funds of microcredit, making protection policies such as setting the limit of interest rate, and training the staff to enhance the quality and skill.This paper attempts to explore a new path to effectively manage microcredit business. It also provides possible methods and directions to rural commercial bank’s reformation and development, as well as practical and theoretical guidance to other rural financial institutions nationwide.