Discussion on Rural Financial Problems from the Perspective of Theory of Constraint

Feng-lin Qian, Can Cao and Xu-jin Pu

Asian Agricultural Research, 2011, vol. 03, issue 07, 4

Abstract: Inadequate rural financial services and low service efficiency lead to the situation that a large sum of money flows from rural areas to urban areas through commercial banks. The situation goes against the development of rural production and causes the extreme lack of rural capital, the difficulties in loaning and the prevalence of usurious loan In view of the problems existed in rural financial system, the rural financial developmental trend. rural gross production .rural financial scale and rural financial efficiency from 1983 to 2008 are empirically analyzed by using the Pagano model in endogenous growth theory. the research assumes that, rural financial scale has positive relation with rural economic output, that is to say, the expansion of rural financial scale can facilitate the development of rural economy; the rural financial efficiency has negative relation with rural economic development. In Chinese rural areas, the economic development still relies on the expansion of rural finance. However, at the same time of increasing the financial scale, the efficiency of rural finance is deceasing gradually. Thus, the support of rural finance on rural economic growth lies at the low level. Therefore, in view of the basic prerequisite of rural economic development, two solutions are adopted and Japanese and Korea experience are used. The measures are as follows. First, conducting organization innovation through promoting new village construction and gathering dispersed farmers to form rural cooperative organization to reduce transaction cost. Second, transforming financial support from exogeneity to endogeneity and market-oriented rural finance to effectively solve the efficiency of rural finance.

Keywords: Agribusiness (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:ags:asagre:119718

DOI: 10.22004/ag.econ.119718

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