Research On The Performance Improvement Strategy Of The Rural Credit Cooperatives In Heze City

Rural credit cooperatives, established with the approval of the People’s Bank ofChina, are financial institutions providing financial services to peasants and smallenterprises located in rural places. The foundation of rural credit cooperatives is based thefact that peasants and small rural enterprises need small number of loans but they do nothave good credit. The characteristics of peasants and rural small enterprises make the largecommercial banks not willing to provide loans to them, and which make rural creditcooperatives become the main source of credit loans for them. At present, with thedevelopment of market economy in China, commercial banks have been entering a newround of reform. One task of this wave of reform is to improve the network distributionand thus to further the healthy development of the rural credit cooperatives.However, as the advancement of marketization of interest rate, rural creditcooperatives are facing new opportunities as well as threats. Rural credit cooperatives arecharacterized as large in number, low level of management, and low capability in riskprevention. For those rural credit cooperatives, how to compete with other commercialbanks and improve market share and financial performance, has become a major challenge.In this background, this paper firstly analyzes the evolution process and current situationof the marketization of interest rate, and identifies the potential opportunities andchallenges exerted on rural credit cooperatives by this marketization. Followed with that,we assess the operating performance of rural credit cooperatives in Heze city, and pointout the deficiencies in their performance management. Finally, we propose somesuggestions for these institutions on how to improve their operating performance. Thisstudy also sheds light on other financial institutions especially the smaller commercialbanks.