A Study On Internal Gorvernance Of Rural Mutually Financial Cooperative

Rural finance is an important factor supporting the development of modern agriculture economy, the lack of supply of rural finance and insufficient competition seriously restrict the development of rural economy. So in 2004 the new cooperative financial organizations——rural mutually financial cooperatives emerged. Then in 2007,the CBRC released the Regulatory Interim Provisions of Rural Mutually Financial Cooperatives,recognizing the unions’ important role in rural finance, the development of the unions open a new page. Shortly before,there are two mutually unions collapsing in GuanNan county,Jiangsu province of October 2012,which expose a new dilemma about the rapid development of the unions and the relative lack of internal and external governance mechanisms.The mutually uninos were born inside of the famers,which have basic characteristics like voluntary,mutually,democracy and so on. These natures decide the limited role of the external governance, strengthen the internal governance has a high practical value. Broad aspects of internal governance including organizational objectives,internal governance structure,internal governance mechanisms and internal governance culture. Improving the internal governance can be seen as a system works which need to work together in order to reach the target. In a word,internal governance provides a better solution to the principal-agent problem,and forms the corresponding checks and balances mechanism for various stakeholders of mutually unions to guarantee its normal operation.This article first defines the key words of rural mutually financial cooperatives,internal governance and its cultural, and generalize relevant research of the existing internal governance,governance culture,and the relationship between them. Then combining cooperative financial theory, modern property rights theory, principal-agent theory and transaction cost theory, the article focused on three aspects,which is organizational goals,governance structure and governance mechanisms of the mutually unions. After that, through on-site interviews and questionnaires to get the the initial data,the artical summarize the current situation and find the internal governance problems of the rural mutual financial cooperatives based on scientific statistical analysis. At last,the paper propose practical policy recommendations with the actual situation, to provide a reference for the union out of the current business predicament.According to the survey results,we can find that there are many internal governance problems of mutually unions. For example, there is a deviation between its current development plan and its initial target;governance structure is a mere formality, "internal control" problems are more prominent;there are many deviations and failures in governance mechanisms, including decision-making mostly depend on the leader, the lack of awareness and means of operating risks, benefits incentives blind pursuit the absolute fairness and ignore the relative fair, supervision dependent on government regulation while ignoring internal supervision;lack of internal governance culture and so on. For the actual situation, the article further made clear management objectives:to create a good internal governance culture; to optimize the internal governance structure of mutually unions;enhance risk management capabilities to prevent potential operating risks;establish an effective benefits incentives and so on, to protect the union continued robust operation.