Abstract
The problem of rural financing is one of the major challenges to the emerging China. It is challenging forgovernment authorities to provide adequate financial resources and access to financial institutions in ruralagricultural areas to farmer households. The development of Village and Township Banks (VTBs) hasremarkably increased since 2008 but the deposit collection of VTBs is comparatively weaker than the loandisbursement. Despite of facing numerous challenges, establishing within the framework of new-type financialinstitutions is playing a significant role for the development of agricultural sector. For the sustainabledevelopment of VTBs, VTBs should set up staff and member incentive system, introduce innovative financialproducts; and strengthen the agricultural insurance system. The cooperation between VTBs and the other ruralfinancial institutions should be developed to meet short-term rural financing gap and to strengthen theinstitutional capacity of VTBs. The government’s support in policy formulation and financial assistance isessential and the local government intervention should be discouraged. An autonomously functioning financialinstitution can enhance the sustainable development of rural households’ income, in particular, and theagricultural sector, in general.
Highlights
Rural Financial System in ChinaRural finance is a major part of overall China's financial system, where 52% of the entire population still lives in the rural areas
In order to solve the problems in rural financing, the authorities (CBRC, Ministry of Finance and PBOC) have introduced different policies such as the establishment of mutual-aid financial aid projects, the introduction of new-type rural financial institutions, the establishment of banking networks in rural areas and less developed regions
The establishment of Village and Township Banks (VTBs) within new-type rural financial institutions is a useful financial mechanism to solve the problem of rural financing in general and broaden the network coverage of financial institutions and financial inclusion in particular
Summary
Rural finance is a major part of overall China's financial system, where 52% of the entire population still lives in the rural areas. Rural finance started after the independence of the Agricultural Bank of China (Here in after ABC) from the People’s Bank of China (Here in after PBOC) in February 1979 The former is a policy-based financial institution specially focused in agricultural and rural development. Such kinds of activities cause massive countryside’s deposit outflow, and created difficulties in financing rural areas. The portion of unbanked village and townships significantly decreased 5 years period between 2007 and 2011
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