Research On Risk Identification, Evaluation And Prevention Of Rural Micro-credit

Rural Credit has an important role in promoting stable and efficientagricultural production and improving farmers’ income and living standards.Due to lack of risk management system and technique in rural micro-creditinstitutions to guard against credit risk, the sustainable development of ruralmicro-credit is threatened. Therefore, there is realistic basis and theoreticalsignificance in risk identification, assessment and improving riskmanagement measures for rural micro-credit. On the basis of reading a lot ofliterature, theoretical basis for rural micro-credit risk management arebrought out and an overview of the development process of China’s ruralmicro-credit is described. Taking Xinhua County in Hunan Province asexample, through in-depth survey, in understanding rural micro-credit development status of Xinhua county, the external risks and internal risks areidentified, and the causes of risk are analyzed that rural micro-credit risk ofXinhua County arises mainly from adverse credit environment, imperfectasymmetric information, lack of the legal environment, delay of financialmarket construction; the internal risk exists because of its poor historicalfoundation, biased incentives, lack of management systems and neglection ofloan management. Through construction of the specific index system of riskassessment, in reference of risk degree standards designed, combining withthe use of expert evaluation method and AHP, rural micro-credit risk levelsare evaluated and a consistency test is done. It founds that the main risksfaced by rural micro-credit, sorted in descending order, are: operational risk,credit risk, supervision risk, environmental risk. Through comparing with thewell-developed rural micro-credit examples abroad, the problem are furtherpointed out and the experience implications are brought out. Finally, specificstrategies to deal with external risks and internal risks in micro-credit areproposed.