Research on Rural Financing in China with Reference to Village and Township Banks: An Overview

The problem of rural financing is one of the major challenges to the emerging China. It is challenging for government authorities to provide adequate financial resources and access to financial institutions in rural agricultural areas to farmer households. The development of Village and Township Banks (VTBs) has remarkably increased since 2008 but the deposit collection of VTBs is comparatively weaker than the loan disbursement. Despite of facing numerous challenges, establishing within the framework of new-type financial institutions is playing a significant role for the development of agricultural sector. For the sustainable development of VTBs, VTBs should set up staff and member incentive system, introduce innovative financial products; and strengthen the agricultural insurance system. The cooperation between VTBs and the other rural financial institutions should be developed to meet short-term rural financing gap and to strengthen the institutional capacity of VTBs. The government’s support in policy formulation and financial assistance is essential and the local government intervention should be discouraged. An autonomously functioning financial institution can enhance the sustainable development of rural households’ income, in particular, and the agricultural sector, in general.