A Study On Profit Distribution Between Members In Rural Mutual Fund Organizations

With the existing rural financial system not suitable for farmers,financial needs,farmers' financial needs are not able to get satisfaction.Rural mutual fund organizations born at the right time have been replicated and popularize continually.Rural mutual fund organizations are membership-driven financial organizations with the goal of maximizing members' benefits.A distribution mechanism which can make a balance between fairness and efficiency should be set up in rural mutual fund organizations in order to stimulate members and attract potential members to join in.With social stratum divided in rural areas,resources owned by each stratum become different,which makes core members and ordinary members coexist in rural mutual fund organizations.In practice,core members possess the actual decision-making right with their resource advantage and members general meeting which should have been the highest decision-making body becomes a mere formality.Ordinary members are not able to safeguard their own interests with the attachment relationship to core members which cause incentive systems in rural mutual fund organizations to have a positive bias towards core members.The paper chose the perspective of profit distribution between members in rural mutual fund organizations,analyzed its problems and provided references for perfecting members distribution system.The framework of this paper is divided into six parts.The first part introduced research background,significance of the study,research objectives and brief contents,technology roadmap showing the overall framework,the study methods and data sources as well as possible innovation and deficiency of the study.In second part,the paper reviewed the related literature on the distribution in rural mutual fund organizations,cooperatives and corporate enterprises,which was able to provide references to this study.The third part,with Theory of Distribution,Incomplete Contract Theory and Resource Dependence Theory,analyzed the approaches for core members to occupy the benefits of ordinary members on the basis of risks and interest compensation of core members and ordinary members.In the meantime,this part explained the realization mechanism of occupation theoretically starting with the motive and capacity of core members and established the research assumptions.The fourth part verified the approaches for core members to occupy the benefits of ordinary members with case of S Rural Mutual Fund Organization in County A,Yanchen,Jiangsu Province from two aspects:statutory regulation and actual practice.The fifth part chose the appropriate indicators to describe the degree of occupation,capital of core members,the distribution for members,internal governance structure and the scale of rural mutual fund organizations separately according to the analytical framework and the research hypotheses and carried out a descriptive analysis of these indicators.This part also used panel data models to analyze the stimulative and inhibited factors of the degree of occupation according to the analytical framework and the research hypotheses.The last part summarized the full text and proposed related policy recommendations.Main conclusions can be drawn based on the above analysis:(1)The nature of rural mutual fund organizations decides they should follow the principle of distribution according to work and limited capital returns.Mutual aid money is much more than capital and therefore mutual aid money make a greater contribution to the profit of rural mutual fund organizations.More profit should be distributed according to the percentage of mutual aid money even if capital takes more risk than mutual aid money;(2)Core members could occupy the benefits of ordinary members through deciding the distribution scheme and their salaries.Case study shows that the occupation through deciding core members' salaries is more likely to occur when external supervision enhancing.The enhancements of external regulatory agencies' requirement to anti-risk capability make rural mutual fund organizations set aside surplus reserve and general reserves fully which reduce the distribution for members.Core members are not able to gain more benefits through deciding the distribution scheme because of the limitation of distribution base,therefore they choose to gain benefits through salaries before distribution;(3)Empirical study shows core members' capital,number of core members in the council and the president of council serving the manager concurrently have significant positive effects for the degree of occupation and the number of internal audit has a significant negative effect for the degree of occupation.Policy recommendations are as follows:(1)controlling the capital of core members;(2)controlling the number of core members in the council;(3)separating the president of council and manager;(4)establishing effective supervisory mechanism.