Farmer loans where credit is the key

Farmer loans where credit is the key

for a long time, of loans was rural economic development "long-standing". In this regard, the academic view, in order to solve problems of farmers ' loans, must be vigorously developing small and medium banks and rural banks. But the reality is, in recent years, rural financial institutions, money continues to flow to the city. Farmer loans hard to where?  In my opinion, study this problem can not be businesslike, but in theory find the crux of the problem, then solve the problem.

one, from the perspective of financing risk bearer of

financing is usually divided into two types: one is the direct financing; the other is indirect financing. Direct demand-side financing refers to funds obtained through the issuance of securities in the form of funds; indirect financing to banks, financial institutions such as trust for the intermediary to obtain funding.  

from the formal point of view, an obvious difference between the two is that the former do not need intermediaries, the latter through intermediaries, and indirect financing to the premise of direct loans-financial intermediaries to raise the money, then the loans, discounted funds, to the demand side, a double a lending relationship.

in addition, there is an important difference between direct financing and indirect financing, and that the risk of both subjects. In reality, both direct financing and indirect financing there are a certain amount of risk, for example due to changes in market demand and the production and operation of uncertainties and other factors, lead to finance operating losses or bankruptcy, ultimately unable to fulfil a contractual liability and obligations and corresponding economic loss to creditors or investors. Enterprises issuing shares, for example, if the business has run cause the stock price to fall, investors buying into funds depreciate or even wiped out. Nevertheless, the enterprise is not liable to the shareholders.

This is because companies selling shares is a direct investment itself shifts the risk to the investor, and investors buy shares means happy and business risks. From this perspective, the direct financing is a financing, but also a risk compensation mechanism. Indirect financing different banks as financial intermediaries, first in the form of CDs to borrow from depositors, then the lending of borrowed funds to a third party. In this two-tier lending, banks are not only brokers, and investors. According to the Bank's profit model of low deposit high loan, if the loan be linked back with interest as scheduled, banks will receive a corresponding return; instead, financier once losses or bankruptcy orders banks to back the loan, the Bank not only to loss of interest, still have to pay principal and interest to depositors.  Visible, subject of indirect financing risk is banks.

the second, from the perspective of risk credit costs

investors risk-averse, it is necessary to finance credit, fully aware of their credit status (including balance sheet, management ability, performance, and so on). The problem is that credit is an information-gathering process, which must produce the appropriate credit costs. Although financing risks are borne by the investors, but there are different ways of financing the investors, so the cost of credit is different.  Generally speaking, direct financing of credit costs will be relatively low, indirect financing credit costs will be relatively high.

direct financing usually is one of many investors in a company or is one of many depositors to a Bank, that is, "to one", so the lower credit costs. Indirect financing instead, investors are mainly banks, which lent on the families, then the bank credit is "one to many". This indirect financing credit costs are much higher than those of direct financing. Loans to farmers, for example, Bank lending mainly to view the archives for evidence before, through the archives about borrower income, property, business, and other information.

but the survey, farmers have neither the financial records of more than 90%, there is no historical data is available. Credit and banks, faced with millions of individual farmers, due to poor traffic conditions in rural areas, farmers ' residence dispersed, bankers to leave villages, about a farmer's financial situation and credit conditions are very difficult. Not only the high cost of bank credit to farmers, banks towards corporate lending is "one to many", also takes high-cost credit to enterprises, this is the reason why some SME loans.


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