Study On The Risk Management Of Rural Small Credit Loans

The concept of microfinance originated in Columbia and the United States,non-profit organizations explored the way of providing unsecured microfinance service to the rural poor.China's microfinance gradually developed in the middle of 1990 s,initiated by the government and non-profit organizations to promote poverty alleviation.Since the State Council issued the reform on rural financial system in 1996,the Rural Credit Cooperatives acted as the main force in the rural economic development,providing lots of financial support,especially a huge number of micro credit loans to the farmers.Improving risk management and promoting sustainable development of micro credit have been a matter of great importance,no matter to the improvement of rural economic or the development of Rural Credit Cooperatives.On the one hand,the Rural Household Micro Credit Loan is the foundation of the "three-agricultural economy" development,building the new socialist rural areas.As an agricultural country,there are 900 million people living in rural areas with a population of 1.3 billion in China.For a long time,lack of financial services,especially insufficiency of credit service,has been a bottleneck restricting the development of rural economy.A large number of low-income farmers has no access to financial services and support from the formal financial institutions,and their living standards have been hovering in the poverty edge.In order to promote the development of rural economy,it is necessary to optimize the allocation of rural resources.Since finance is the core of modern economy,rural finance is the heart of rural economy and plays a key role in optimizing rural resources allocation.The introduction of the Rural Household Micro Credit Loans has been providing financial support to rural low-income families,helping them to buy production materials,enhance manufacturing enthusiasm,improve agricultural producing efficiency,increase income and boost consumption.Therefore,the Rural Household Micro Credit Loans has been playing an irreplaceable key role in optimizing rural resources allocation and promoting development of rural economy.On the other hand,promoting the development of Rural Household Micro Credit Loans is the key way of building core competitiveness for Rural Credit Cooperatives.In March 1951,the National Credit Cooperation Meeting reported "Due to production recovery in land reform area,farmers had become richer,demanding savings surplus and expanding reproduction.And because of improved economic conditions,rural family economy was weak in front of unforeseen circumstances and hardly obtained loans.It's an urgent requirement to develop rural credit cooperation for the masses of peasants ".Thus,since the birth of Rural Credit Cooperatives in new China,serving the needs of the countryside and farmers has been an essential characteristic compared with other banking institutions in more than 60 years.According to statistics of the China Banking Regulatory Commission,agriculture-related loans(excluding bill financing)have reached 26.4 trillion by the end of 2015,among which 30% of agriculture-related loans and 78% of farmers loans are offered by the Rural Credit Cooperatives.Meanwhile,the Rural Credit Cooperatives also have shouldered 98.4% of institutional coverage and 67.7% of service coverage of the gaps of the basic financial services in the rural area.With the opening up of financial market and continuously advancing of financial reform,foreign banks and private banks as well as network finance emerged like bamboo shooting after a spring rain in recent years.In front of fierce competition in the banking industry,how to build up core competitiveness and fight for an invincible position in the market has been a major problem stirring the nerve of all banks.Since city markets have been entrenched by many different financial institutions and competes with each other fiercely,Rural Credit Cooperatives have no competitiveness in the city.Born in countryside with a large number of branches and years of accumulated experience,the Rural Credit Cooperatives have competitive advantage in the rural area.And as the main and traditional service,the Rural Household Micro Credit Loans should be the priority of development to build up core competitiveness in rural market.However,there are many problems in the development of the Rural Household Micro Credit Loans,such as low repayment rate,small loan amount,high operating cost and so on.How to define the Rural Household Micro Credit Loans? What are the problems in its development? How to deal with the contradiction among the public welfare of poverty alleviation and the financial service demand of farmers as well as the profitability of financial institutions? How to improve risk management in order to promote sustainable development of the Rural Household Micro Credit Loans?With these questions in mind,through file research,case study and data analysis,this paper defines connotation of the Rural Household Micro Credit Loans and its risk management,explores its development process,analyzes problems and causes.Also,combining case study of Xichang County Rural Credit Cooperatives,this paper provides management recommendations to improve Rural Household Micro Credit Loans risk management,and promote the long-term sustainable development of rural economy and rural credit cooperatives,such as products improvement to meet the needs of agricultural production,innovation "bank + farmers + farming cooperatives" loan mode,improve performance appraisal and so on.