A Study On The Cooperation Between Microfinance Institutions And Commercial Banks In Rural Area

Since more than30years of the Reform and Opening-up, China has initially formed rural financial system which dominated by large commercial banks, complement each other by policy finance, commercial financial and cooperative financial. However, the inadequacy of effective supply of capital still is one of the most important reasons which restrict the rural economic development. Therefore, studying and promoting the cooperation between microfinance institutions and commercial banks has the vital significance in improving the rural financial supply and perfecting rural financial organization innovation.In view of this, this paper defined the microfinance institutions as small loan company while commercial bank as large and medium-sized commercial banks with the guide of some relational theories such as information economics, the new institutional economics and sociology. Through field survey, we found that Small loan companies generally have the problem of shortage of funds, cooperative desire is strong. Large Commercial Banks which is represented by the Agricultural Bank have realized the importance of cooperation, and organize experts to conduct theoretical research. Local governments actively take measures to encourage them to cooperation. There are some problems such as the cooperation mode is single, the ideal of cooperation has not yet formed, the government encourages cooperation policy is not perfect. The reason of the above problems are three, one for some parts of the small loan company’s non-standard operation affects the enthusiasm of commercial banks; two for commercial banks’willingness to cooperate is not strong for the reasons of economy of scale and moral hazard; three for the attitude of encourage cooperation by local governments is based on taxes and political achievements which increased the commercial banks’worries about risks.This article builds a static game model to demonstrate cooperation whether can bring excess return to both sides. Small loan companies can easy to identify credit risks while commercial banks can’t because of the adverse selection which course by the asymmetric information lead to loan interest rate was execute according to the average level of risk. By comparing the changes of expected benefits between before and after cooperation, we can see that cooperation make an achievement of "win-win". To analyze the factors that affect cooperation, the article constructed an evolutionary game model. We reach a conclusion that cooperation cost rate, guaranteed rate, the wholesale loan interest rates and operating conditions of small loan companies will affect their willingness to cooperate.This article divided the existing model of cooperation of international into direct and indirect cooperation mode; the former is represented by the micro-credit of the People’s Bank of Indonesia while the latter is represented by the cooperation between India’s ICICI Bank and Micro-credit organizations. We are to analyses the precondition of the two modes from the perspectives of the ability of commercial banks to control the rural market, the operating experience of micro-credit institutions in agricultural loan, the agricultural development situation of their own national (regional), and summarize the successful experience. Finally, the article put forward appropriate policy recommendations. Small loan companies must improve their own quality; establish various scientific and reasonable management systems. Commercial banks should actively study and promote the mechanism which cooperates with small loan companies. The government should improve the policies and regulations of cooperation, and establish the risk compensation mechanism of it.