Research On Rural Microfinance Mission Drift In China

In 1970s and 1980s, microfinance emerges in the Asian African Latin American developing countries, which has been developing rapidly since the 1990s, which has been supplement of the traditional financial system in many developing countries effectively. To solve the problem of shortage of rural financial services, microfinance was introduced into China, after 20 years of rapid development, China has gradually formed rural banks and small loan companies represented rural MFIs system.Microfinance is a new financial system which is different from the traditional formal financial arrangements; its main mission is to serve the customer base that cannot be obtained financial services from the formal financial institutions. However, in reality, most MFIs have encountered problems of sustainable development; it is difficult to achieve their social mission. Analyzing the present situation of mission drift of rural micro-finance institutions of our country, what are the reasons for the mission drift, and how to control, which is the main content of this paper, which has important significance for our country to promote micro-finance.This paper uses the indifference curve and the production possibility curve theory to analyze the mechanism of conflict between micro-finance financial social mission (servicing the agriculture countryside and farmer) and financial objectives (sustainable development). Thereafter, Taking the rural banks and small loan companies as examples to analyze the current situation of mission drift of the rural micro-finance institutions in China, the data shows that some MFIs have emerged mission drift. On this basis, this paper taking the average loan size accounted for per capita GDP in the region of the micro financial institution as the dependent variable, return on assets, yield on gross portfolio, operating expense/assets, cost per loan as independent variables to construct multiple linear regression model to analyze empirically the microfinance institutions mission drift phenomenon, the empirical results show that the depth of coverage will reduce when the organizations pursuing operational sustainability, and the mission drift will appear, and analyzing the reasons for the mission drift from two aspects:the cost of loans and risk control.Finally, some countermeasures from five aspects to alleviate the current situation of micro-finance institutions mission drift are put forward. Namely, increase policy support to the agency; broaden the financing channels to reduce the cost of capital; improve the rural financial environment; promoting the micro-finance to cooperate with the micro-insurance comprehensively; strengthen the supervision of rural micro- financial institutions.