Study On Financial Risk Control For Rural Microcredit Institutions In China

Rural microcredit as a financial innovation system which applies specializedservice for low-income people in rural, has played an important role in the eradicationof poverty and improving the rural financial system. Because of the special nature ofrural microcredit institutions target customers and their business, they have to face thethreat of various types of risk. In China rural microcredit started late, the managementof institutions is backward; therefore risk problem is more prominent, affecting thesustainable development of the institutions seriously. Therefore, in order to improvethe farmers’ capital supply, reduce poverty and solve the Agriculture, Countrysideand Farmer issues, systematic study on the risks issues of China’s rural microcreditinstitutions have a very important practical significance.The financial risk objective exists in the financial activities of economic entities;it is a concentrated reflection of the uncertain form of currency. This paper is based onthe financial perspective, to study the risks of the rural microcredit institutions andrisk control. First of all, on the basis of relevant theory and research def ined theconnotation and the main features of the rural microcredit institutions’ financial risk.And then according to the characteristics of the rural microcredit institutions, with thereference on system and control theory, analysis the formative mechanism of financialrisk of rural microcredit institutions under external and internal environment, andbuild the effect mechanism of financial risk formation&conduct and financial riskevaluation index system for rural microcredit institutions. Secondly, with the methodof systematic analysis and decision analysis, the paper researches the performanceand causes of the financial risk in Chinese rural microfinance institutions. Finally, hepaper sets up the basic concept and counter measures of financial risk control inChinese rural microfinance institutions according to the advanced internationalexperience and practical situation in China, to realize rural microcredit sustainableoperation.