Analyzing the Non-Agricultural Use of Rural Bank Loans from the Perspective of Externality

Analyzing the Non-Agricultural Use of Rural Bank Loans from the Perspective of Externality

LI Guanhua1, MA Linshan2, YANG Hongxuan3

1. School of Economics, Jilin University, Changchun, China, 130012

2. School of Economics, Jilin University, Changchun, China, 130012

3. School of Economics, Jilin University, Changchun, China, 130012

Abstract: Nowadays, most of the Rural Banks focus their core business on providing financial support to the Small and Medium-Sized Enterprises. Hence, because of the limitation of rural bank amount and of the bank scale, the common peasants of countryside can hardly acquire the loan services. Through the analysis on the Non-Agricultural Use of Rural bank Loans and the externalities generated during the production of the small and Medium-Sized Enterprise, the article advocates that in the primary developing period of rural banks, it is justified for the rural banks to mainly provide financial support to Small and Medium-Sized Enterprise.

Keywords: rural bank; externality; “three issues”

Ⅰ.Introduction

In order to amend the insufficiency of the country financial supply, exert the supporting effort of the finance to the countryside and thus boost the developing of the country, China Banking Regulatory Commission publish the 《The Suggestions about Adjusting and Broadening the Entrance Policy of the Rural Financial Institution》and establish rural banks as to serve the issues concerning agriculture, countryside and farmers.(Three issues)

As independent artificial person who takes on full responsibility for the success of a business, the rural banks will naturally pursue the maximum of the margin with the restriction of the relative policy. It will also focus the primary business on the Small and Medium-Sized Enterprises, which bring the banks relatively high income. However, limited by the amount of rural banks and bank scale, rural peasants can hardly acquire the loan services. As a matter of fact, because Small and Medium-Sized Enterprise greatly accelerate the “three issues” construction and also the business of these enterprises belong to the production of agriculture, so the financial support to these enterprises does not violate the principle of servicing the “three issues”. Hence, the article will define the phenomenon that the grass root villager cannot acquire the loans as the Non-Agricultural Use of Rural Bank Loans in narrow sense.

At present, the future plan to solve the problem can be summarized in to two aspects: the first one is to require the government take the role as the warrantor and amplifies the governmental subsidies; the second is to extend the joint guarantee