Providing financial services to those in need?

: challenges and experiences in rural China

Abstract

How can rural financial system better serve the needs of rural economic development, the structure adjustment of agricultural industry and the incomes growth of peasants? This is a fundamental question remains to be answered by those concerning with rural development and three-dimensional rural issues in the contemporary China. The thesis reviews the current studies relating reform and improvement of the Chinese rural financial system, and argues that the existing literature has failed to explain a paradox of China‘s rural financial reform: Why did the rural financial situation fail to improve when the rural financial system has been under a series of reforms? The thesis begins with the bias of policymakers and policy scholars towards the supply side when making and implementing the policies and strategies in relation with the Chinese rural finance reforms. A demand-oriented analytical framework is introduced to understand the exogenous and government-imposed rural financial institutional arrangements in China as well as the need of transitional economy of rural china to a demand-driven rural financial development. To highlight the neglected voice of demand side on rural financial reform in China, a client-led assessment approach of rural financial performance has been adopted to understand the needs and wants of rural economic entities and to reveal the extent to which the current rural financial institutional arrangement satisfies the needs and the wants. A case study of rural households served by the RCC microcredit business and the Community Development Funds in Huoshan County is used to test the implications of the client-led assessment approach. The case study shows how rural households use microcredit, how they regard their experience with the two targeted microcredit projects and how they explain what financial services they truly need and want. Moreover, the factors preventing the microfinance providers from delivering loan services responsive to the needs of rural households are brought to light. The empirical analysis of data collected in the case study shows that at present the Chinese microfinance institutions, both formal and informal, cannot be paralleled with endogenous informal finance in institutional advantages. The Feasibility of the latest rural reform strategy by the government towards a multi-level and competitive rural financial system is therefore becoming problematic. Since the formal and informal financial sectors have their respective institutional strengths and weaknesses, the thesis suggests the linkages between both of them to improve the access of those in need for rural financial services.

Date of Award	17 Feb 2010
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Che Lan Linda LI (Supervisor)