Research On Agricultural Loan Credit Insurance Of China

Rural economic development, agricultural industrialization and farmers’ income has been the subject of high attention. To this end, since 2004, the CPC Central Committee and the State Council issued a continuous 13 document focused on the agriculture, rural areas and farmers problems, Providing policy support and direction to promote the development of rural areas. In 2005, the Fifth Plenary Session of the Sixteen Session proposed construction the new socialist countryside of "production development, the rural wind civilization, well-off life, village clean, democratic management", which indicates that the rural development has entered a stage of transformation. The transformation of rural development mode is bound to put forward new requirements to the original rural financial service system. Rural finance is the driving force for promoting the development of rural economy, promoting the increase of farmers’ income, the reform of rural finance has always been in the process of the comprehensive development of the rural economy. With the reform of rural credit cooperatives in 2003, the reform of rural financial system has been steadily pushed forward. According to the characteristics of rural economic characteristics and real needs of the financial institutions, the financial institutions has created many credit products and financial services, which is in line with the characteristics of agriculture, rural areas and farmers. Although rural financial innovation has achieved great success, increasing rural financial support for agriculture, agriculture loans available increased gradually, the problems are alleviated to a certain extent, but the bottleneck of rural credit didn’t get solved effectively. Lack of effective collateral limits the range of mortgage applications, coupled with the high risk characteristic of agriculture makes financial institutions are reluctant to loans to farmers and small and medium-sized enterprises, the funds required for the development of rural economy cannot be met.In order to break through the bottleneck of rural credit, supported by national policies, the country actively carried out the "credit + insurance" innovation mode. Through the introduction of insurance mechanism, realize the docking of rural credit market and insurance market, transfer credit risk of agricultural credit to the insurance market, and then use the insurance market to carry out risk diversification. The mature combination of credit and insurance in the current is "small credit + personal accident insurance", and the combination of credit insurance and agricultural insurance, guarantee insurance is also actively exploring. The mode of combination of agricultural loan and insurance plays a certain role in dispersing the risk of rural credit, easing the difficult problem of farmers’ loans, but most the existing insurance are guarantee insurance, insured by the borrower. Lack the mechanism of credit institutions to transfer credit risk through credit insurance. To this end, this paper attempts to introduce a new mechanism, from the perspective of the development of agricultural credit insurance to study the solution of agricultural loans, providing a comprehensive prevention of credit risk of financial institutions and a new way to break through the bottleneck of rural financing.This paper firstly describes the background and purpose of the research, and points out the theoretical value and practical significance of agricultural credit insurance. The research results are sorted out and evaluated, and the research methods and the research contents of this paper are described, and the innovation of the paper is pointed out. Secondly, the agricultural loan credit insurance related concepts has been defined, and illustrates the basic theories of agricultural development loan credit insurance, including risk management theory and information economics theory. Specifically, agricultural loan credit insurance is the effective way of risk management for financial institutions and can effectively solve the problem of asymmetric information between financial institutions and the enterprises related to agriculture and farmers, so as to avoid the adverse selection and moral hazard problems. Again, analyze the necessity and feasibility and restrict factors of developing agricultural credit insurance. It is suggested that the development of agricultural credit insurance is necessary to break through the bottleneck of rural financing, transfer the credit risk of financial institutions, expand the business areas of insurance companies, and promote the comprehensive development of rural economy. And the feasibility of the development of agricultural loan credit insurance is analyzed from the aspects of insurability of agricultural loan credit, policy related to the development of agricultural credit insurance and market demand for development of agricultural credit insurance. It analyzes the restricting factors of the development of agricultural credit insurance in China, including laws and regulations are not perfect, rural credit system is not perfect, the insurance company has insufficient supply power and capacity, the rural financial institutions lack of enthusiasm. Then, put forward the design of agricultural credit insurance, including the operation flow, coverage and scope, amount and duration, insured liability, ratemaking and reinsurance mechanism. Through comparison, it is considered that the expected loss pricing model is applied to the agricultural credit insurance premium rate. Finally, this paper puts forward some countermeasures to promote the development of agricultural credit insurance in China.