Research On Interest Rate Of WenZhou’s Folk Lending

The interest rate pricing is an important function of financial institutions, financial institutionsdevelop a reasonable level of interest rates according to the credit status of the borrower’s credithistory, project future earnings and risk, in order to cover the cost of borrowing and loan risk loss.The interest rate is a variable determined by more than a factor. Private lending has its uniquecharacteristics, compared to the price discovery process in the interest rates of commercial banks.Recent years, because of the application of the private financial and social effects,they havecaused widespread concern of many experts and scholars, civil rate analysis method, based on theinterest rate pricing has also become the focus of academia and Industry of common concern.Based on the domestic and foreign research, Marx’s credit Capital theory and McKinnon-Shaw’s"financial repression" and "deepening" theory,this paper makes the further analysis on theprivate lending interest rates of Wenzhou. We start from the summary of the survey data, andoverview of Wenzhou private lending interest rates, and the coexistence of different folk forms oflending rates was discussed in details. On this basis, we review the trend of changes in interestrates of private lending in Wenzhou area in the past three decades and analyzed this matter of thefactors affecting changes in interest rates. Finally, we proposed policy recommendations forprivate lending interest rates.The paper’s main conclusions:(1) From the analysis of nearly30years of Wenzhou privatelending interest rate fluctuations, we found that private financial interest influencing factors arecomplex, including opportunity costs, transaction costs, risk premium and monopoly profitsconstitute the supply factors, including demand factors such as alsocredit capacity, repaymentwishes, financing needs, preferences and also include the supply of credit funds of the formalfinancial rent-seeking costs, interest rate policy, the credit structure and influencing factors.(2)Private lending showes a trend of expansion, loan capital is highly profit-driven and way ofborrowing is flexible and efficient.(3) Various forms of private lending interest rate and theinterest rate floating range.According to Wenzhou private lending interest rates, we made the following policyrecommendations:(1) Under the premise of effectively guard against financial risks, liberalize thebarriers of financial markets to enter and exit barriers, establish a fair and effective competition inthe market rules,and give full play to the private financial supportthe role of private economicdevelopment.(2) The government should not interfere too much in the private financial, and itshould respect the private financial markets, respect for the creativity of the private financiallending body to assume the maintenance responsibilities of entrepreneurs living environment, andgive market forces full play to the space.(3) Improve the financial system to optimize thefinancial ecological, reduce the informal profit margins in the financial markets.