A Study On The Sustainable Development Of The Microcredit Of Rural Credit Cooperatives In Xinzhou City

Since 2004, the First Policy Document of Chinese government has focused its attention on rural issues, with an intention to increase the income of rural residents and thus narrow the income gap between the urban and the rural. Nevertheless, to push economic development in rural areas, we must first and foremost address the issue of fund shortage there. Microcredit is a new credit product specially designed for poor farmers and low-income groups, which provides to solve financial constraints in rural areas. Therefore, microcredit is the most important financial strategy to procure income growth of the farmers and the development of the rural areas.Xinzhou City is a poverty-stricken area that is subject to the care of Chinese poverty alleviation policies. The area lists 11 state-level poverty counties with a sluggish economy and numerous poor peasants. Xinzhou rural credit cooperatives, as an important force in the financial market, have contributed greatly in the economic development through a steady stream of small loans. It not only helps farmers overcome innumerable financial difficulties, but also relieves the burden on the municipal government. Although the rural credit cooperatives in Xinzhou have made certain achievements, but overall, the product of microcredit is still immature, facing many constraints and challenges, such as high cost, high risk, underdeveloped credit mechanism and etc. Only through constant improvement and innovation, can the microcredit in Xinzhou City meet the demands of economic development and play a critical role in solving of the problems of the area. Based on a combination of theory and practical cases, the author consulted researches on the microfinance of Rural Credit Cooperatives both at home and abroad, and did surveys in three towns in Xinzhou City, through which latest developments of rural microcredit were grasped and problems were identified, such as too much administrative intervention from the government, lack of supporting measures, the amount of the loans being too small, immature management system, insensitive of risk monitoring and etc. By using the structural equation model, the status-quo of microcredit in Xinzhou is analyzed and discussed, and some suggestions are put forward both from the aspect of the government and of the rural credit cooperatives. To ensure a sustainable development of microfinance in Xinzhou, the government should first diminish its intervention on the microfinance business of rural credit cooperatives, optimize policy environment and vigorously develop the rural economy; meanwhile, the credit cooperatives should take a set of measures such as providing comprehensive services, perfecting the system of risk monitoring, and building reward and punishment system.