The development of village banks in China Case Study 13818.doc

The development of village banks in China Case Study      Abstract: The three different regions of China village bank research, found that three more village banks capital adequacy, deposits and loans grew rapidly, but in regulatory policy, the Government supports efforts and its own operation and management problems that still exist. Should strengthen supervision in the future, government support, self-construction of three aspects of village banks to promote the development of village banks.      Keywords: rural finance; village banks; Countermeasures           As of the end of 2009, 2, China has established more than 30 village banks. In order to fully understand the village banks in different parts of the country's development status, I select the Huimin village bank in Sichuan yilong limited liability company (hereinafter referred to as yilong Huimin village bank), Chongqing Dazu HSBC Bank village limited liability company (hereinafter referred to as Dazu HSBC Bank village ), Jilin Dongfeng village banks integrity Co., Ltd. (hereinafter referred to as the East HSBC credit village banks) to investigate and study the three banks.           1, three basic conditions of village banks           (A) corporate governance      From the establishment of time to read, yilong Feng Huimin village bank and the East are the integrity of village banks established in the country of the first pilot village banks, village Dazu HSBC bank is the first village bank in Chongqing is also the first foreign towns and villages in western banks, the establishment of longer than night. From the personnel point of view, the number of people of 20 or so, a smaller number. From the capital of view, three more village banks with capital adequacy, large enough to HSBC, the highest village bank capital, which is inextricably linked to the strength of HSBC strong. From the capital sources and composition of shareholders of view, holding parties are banking financial institutions, and the right to have absolute control. In addition to Dazu HSBC Bank village-owned, the other two sources of bank funds are dispersed.      (B) the business development of      3 village bank's business since its inception a certain development, but might not stay Huimin village bank deposit and loan growth slow, and the integrity of village banks Dongfeng compared to the same as the establishment of the two banks, but the latter is the number of deposits and loans the former six times and to achieve a profit 380,000 yuan. Dazu HSBC Bank village due to open late, the lower the number of deposits and loans, is not yet profitable.           Second, the difficulties facing the development of village banks           (A) The village banks access threshold is too high      China Banking Regulatory Commission in 2006 "issued by the relaxation on the adjustment of financial institutions in the banking industry in rural areas access policy to better support the building of new socialist countryside Some Opinions" (hereinafter referred to as "Opinions") provides that village banking approach should be taken to initiate the establishment of and there should be one or more (including a) domestic and foreign financial institutions in the banking industry as the main sponsor. Village banks provided the largest shareholder or the sole shareholder must be a banking financial institution, if no such institution can not be set up village banks. Although this provision is conducive to village banks access to proven expertise and personnel support, but the objective situation is that many poor rural areas is difficult to find qualified and wishes of the sponsor. "Opinions" also provides a single stake in the banking financial institution shall not be less than 20%, the proportion of a single natural person holding a single other non-bank corporate legal persons and their related parties total equity ratio shall not exceed 10%, which also limits the Company or a corporation aggregate as the main sponsor and then become a controlling party opportunities. These provisions indicate that village banks remain cautious on the private capital, shareholding restrictions reduced the proportion of shares the enthusiasm of private capital, this more stringent restrictions on market access easily lead to village bank "due to the dominance," village banking business will be the majority shareholder is the dominant promoter can easily degenerate into a promoter of "Xi Chu institutions", resulting in low efficiency in allocation of financial resources. Even more serious is that if commercial banks or rural credit cooperatives as a sponsor of property ownership is not clear, will cause village bank's internal governance serious distortions, and induce the agent of moral hazard.      (B) the tax burden on village banks than credit unions (Rural Commercial) re -      For example, the East village HSBC Bank credit of 5% sales tax, sales tax added to 3%, 5% of urban construction tax, income tax is 25%. More tax types, tax burden heavier. While the local rural credit cooperatives, sales tax is only 3.3%, 1.7% lower than the village banks, and the income tax-free for three years. At the same time, the Government's support for village banks is not enough, there is no access to rural credit cooperatives, village banks have been enjoyed by the agriculture re-lending, entrusted loans, subsidized loans, deposits and other fiscal incentives. Inconsistencies in the tax burden and preferential policies, so that village banks has been further squeezed profit margins, but also to competition with the rural credit cooperatives at a disadvantage.      (C) financial products, services, guarantees and lack of innovation by means of mortgage      First, the lack of innovation in financial products and services. Banks is currently the main towns and villages of traditional deposit and loan business or profit channel for a single, in financial product development, such as purchase funds, bonds, payment of utilities, purchase of financial products, insurance and other businesses have not been carried out. Secondly, the farmers lack of guarantees and mortgages and means. Dazu village banks in loans, mainly confined to traditional means of mortgage, such as housing, cars and so on, the lack of a new way of guarantees and collateral. Department of HSBC Bank village designed the value chain model of working capital revolving loan yuan, circulating overdraft, "the company farmers / middlemen" loans, "co-operative members" loans, guaranteed loans and other operations were not carried out. At the same time, the credit approval process cumbersome and inefficient. Dazu HSBC village banks in credit management, HSBC has become the main draw on the operational experience and internal control system, this system in the developed regions and cities are effective, but in China's western rural areas it appears that inefficient and outdated. In addition, the village bank deposit-loan ratio imbalance, there is liquidity risk and prone to payments crisis. As of the end of 2009, two East village HSBC credit balance of bank deposits and loans were 15 million, 8886 yuan and 1.5092 billion yuan, the proportion of deposits and loans up to 95%, higher than 75% of the China Banking Regulatory Commission requirements than 20%, there is a larger flow of risk. Meanwhile, the village does not match the bank deposit and loan term is apt to cause financial risks. The survey found that part of the village bank deposits mainly demand deposits, while loans mainly term loans, resulting in stronger liquidity deposits, loans, high stability, if the trigger is easy to prevent improper payments crisis.      (D) a lower lending rate      At present, although regulators have not set the lending interest rate cap, but the village banks and credit cooperatives (agricultural firms) is different from the implementation of the floating range of lending rates, towns and villages floating rate bank loans than the smaller credit unions. Dong Feng village bank lending rate is the benchmark interest rate go up 70% 75%, while the local rural credit cooperatives are floating 130%. Dazu village banks are the benchmark interest rate go up 70 percent, while large enough to float the agricultural firm is 130%. In addition, the current village bank's capital outflows that are more serious, namely, the so-called money "Nongzhuan Fei." The end of 2009, two large enough to HSBC village bank loan balance of 1649 million yuan, all of the company's class mortgages, no personal loans and household loans. Have not yet opened an agriculture-related loans, business has not penetrated into the village area, more of a flow of county and other types of enterprises. As of December 2, 2008, yilong Huimin village bank loans, 634 pens, amounting to 3719 million, but the amount of loans for farmers accounted for only 40% of households did not become an absolute loan principal. In contrast, Dongfeng village banks in an outflow of funds not done well, loans for farmers object full of urban operations were not carried out, is a real Farmers Bank.      (E) village bank branches and business outlets less      Dazu County has 25 townships, population 930,000, while the village is only one bank, it is difficult to cover all townships. Yilong Xian has 56 townships, 918 villages, population 1.08 million, November 26, 2008, yilong village banks to open China's first village bank branches, but compared to rural credit cooperatives and postal banks continued to show a single upper hand Li Bo. And the village banks are in the current location near the county or the county towns, there is no deep into remote rural towns, and village banks to provide "village" in mind there are gaps. Such conditions make it operational village banks in a vicious circle: fewer outlets, customer deposits, less the greater the financial restraints; loans less bank performance, the lower the ability to open new outlets lower. Reposted elsewhere in the paper for free download http:/      Third, measures           (A) improving the financial supporting policies      Properly relaxed village banks "sponsor" system restrictions. Liberalization of private capital could be considered an appropriate access restrictions, allowing enterprise or corporation aggregate, non-banking financial institutions, direct investment and holding, so that farmers and investing in shares is conducive to survival and development of village banks. At the same time, foreign banks can make use of capital and management advantages, and attract more foreign banks to invest in village banks. Improve the financial lending, anti-money laundering regulatory policy. First, increased financial lending support to enjoy the same treatment as commercial banks, and ease their capital shortage. Second, accelerate the establishment of a deposit insurance system, to develop contingency plans for unusual circumstances, to detect and defuse the crisis village bank payment and reduce the risk of village banks to protect the interests of depositors. The third is to strengthen anti-money laundering supervision and control of corruption and other illicit money transfers to the village banks, village banks as money-laundering to prevent the flow of funds to.      (B) local governments should support the development of village banks      Improve the relevant supporting policies to give tax preferential treatment. Local governments should be in financial, tax policy, given village bank tilt. Such as: the business tax to enjoy the same treatment and agricultural firms, allowing pre-tax talk too much for bad debts, and to give banks a village to three years income tax exemption period, so that the steady accumulation of village bank's capital increase. Strengthen the village banking supervision, reduction of capital outflows. In the central bank's policy framework, local governments to establish agriculture-related loans may be the first to reward and punishment mechanism, set up village bank loans to agriculture-related limits, according to the amount determined based on rewards and punishments. A good target for the completion of village banks, funded by the local finance the prize fund. Local governments give tax, and then agriculture loans, entrusted loans, subsidized loans, deposits and other fiscal incentives, to encourage village banks increase their capital investment in the three rural issues and avoid capital outflows. At the same time, strengthening the rural credit system, thus reducing the village bank's default risk and increase the cost of farmers.      (C) The village banks to enhance their self-construction      1, innovative financial products, credit mode and guarantees mortgage model. One variety of innovative financial services as soon as possible in rural areas to promote insurance, guarantees, agents, personal finance, information consultation, funds, bonds, payment of utility bills and bank cards in the city a common financial products and services to meet the increasingly diversified The rural financial service needs. Second, innovative credit, mortgages and the guarantee model. Actively develop a "bank insurance", "village micro-credit bank funds of a company union," "corporate farmers village bank", "Business Association farmers" credit model; the establishment of rural co-ordinator system, financial service stations, farmers loans to groups, actively carry out a security village, farmers mutual insurance and other models.      2, expanding sources of funding. One additional savings outlets. Village banks based on business development needs, choose a favorable opportunity to save resources in the county where the richer urban areas, rural savings, the appropriate additional outlets, deposits, effectively expand the sources of funding. Meanwhile, time was not ripe for the establishment of branch banks, may be provided through additional savings in some rural locations. Second, better economic conditions in rural towns and villages set up bank branches. Third, inter-bank support. Village banks should be strengthened with the host banking financial institutions in the county, mainly to strengthen the banking institutions will have agro-business contacts, in the peak seasonal demand for funds supporting agriculture or temporary working capital requirements, availability of peer support, access to interbank deposits, bank borrowing funds to address the urgent need for funds for supporting agriculture. Fourth, support for village banks to actively explore new business start-up. Support village banks run low-cost source of funds business and intermediate business.      3, and expand the floating range of village bank interest rates. Village banks should be appropriately expanded the scope of interest rate fluctuations, and gradually raise the