Abstract
With the deepening of China’s economic reforms, in the process of gradual diversification of farmers’ incomes, the income growth brought by farmers’ entrepreneurship plays an important role in increasing farmers’ income. The importance of formal financial support for entrepreneurial farmers is self-evident. However, due to various factors between entrepreneurial farmers and formal financial institutions, the supply and the demand of formal financial credits of entrepreneurial farmers are unbalanced. This paper firstly analyzes the formation of formal financial credit constraints of entrepreneurial farmers by combining the current situation of supply and demand of formal financial credits of entrepreneurial farmers, and then proposes countermeasures to alleviate the formal financial credit constraints of entrepreneurial farmers.
Highlights
The Fifth Plenary Session of the 18th Central Committee of the Communist Party of China mentioned that it is necessary to help poor rural households in rural areas escape the poverty situation according to existing standards in China, solving the regional overall poverty in China [1]
Formal financial institutions and informal financial institutions are involved in rural lending under market conditions, studies have shown that even considering informal financial institutions, a large proportion of rural households’ credit needs are not being met, in extreme cases
The main reasons for this situation are: on the one hand, the loan interest rate of formal financial institutions is lower than the market interest rate of microfinance institutions; the amount of funds provided by formal financial institutions is limited; and the formal credit demand of borrowers cannot be fully satisfied; On the one hand, if financial institutions only issue loans to farmers engaged in agricultural production after taking deposits, their profitability is limited
Summary
The Fifth Plenary Session of the 18th Central Committee of the Communist Party of China mentioned that it is necessary to help poor rural households in rural areas escape the poverty situation according to existing standards in China, solving the regional overall poverty in China [1]. The current rural areas face the problem of shortage of funds, and the credit constraint is more common. The credit constraint has obvious effect on the welfare loss of farmers. The main reasons for this situation are: on the one hand, the loan interest rate of formal financial institutions is lower than the market interest rate of microfinance institutions; the amount of funds provided by formal financial institutions is limited; and the formal credit demand of borrowers cannot be fully satisfied; On the one hand, if financial institutions only issue loans to farmers engaged in agricultural production after taking deposits, their profitability is limited. Financial institutions tend to invest most of their funds in non-agricultural enterprises with strong profitability, resulting in rural areas. The transfer of funds to cities and enterprises further aggravates the credit constraints of farmers
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