How Can Rural Financial Institutions Improve Their Financial Service Capacity

Currently, rural financial services remain the weakest link in China's financial service system. As the hollowing-out of rural society in some areas of China leads to industrial hollowing-out, the credit advantage resources on which rural financial institutions in some regions depend for survival are gradually being lost. Some rural financial institutions have no choice but to abandon their rural footholds, and some have even become "water pumps" draining rural funds, leaving rural financial services increasingly trapped in an awkward position. Therefore, improving rural financial services in these areas is extremely urgent. But this is a systematic social project, by no means something that can be accomplished overnight. From the current perspective, there is an urgent need to eliminate certain confusions and vague ideas and further improve the capacity for rural financial services.

First, eliminate the confusion caused by conflating commercial operations with policy functions, and fully unleash the service vitality of rural financial institutions. For a long time, one important reason for the lack of vitality in rural financial institutions has been that they bear too many policy functions. To improve rural financial services, the service function positioning of small and medium-sized rural financial institutions should be redefined, separating policy operations from commercial operations (however, the policy businesses undertaken by rural credit cooperatives cannot be separated; they should be accounted for in separate accounts, and the government should provide corresponding subsidies or bear the capital losses), removing the shackles that hinder small and medium-sized rural financial institutions from exercising their operational autonomy, and revitalizing their operational vitality.

Second, eliminate the confusion caused by the contradiction between expanding business space and the increasingly shrinking rural economy, and comprehensively remove the ideological barriers of rural financial institutions. At present, more and more rural laborers in some areas are moving to cities and towns, causing the deposit-to-loan ratio of some small and medium-sized rural financial institutions to decline further and further. Huge amounts of funds cannot find investable credit projects, leaving them in a dilemma. In response, rural financial institutions should, on the basis of doing well in microcredit, vigorously expand the growth space for credit business, support agricultural industrialization and specialized operation projects mainly carried by new types of agricultural business forms such as rural specialized cooperatives, specialized large-scale agricultural planting and breeding households, and family farms, boldly launch "three-rights mortgage" loans, break the deadlock in guarantee and mortgage loans for agriculture, rural areas and farmers, and improve farmers' ease of access to loans. At the same time, around the supporting service facilities for agriculture, rural areas and farmers urgently needed for urbanization, launch new credit service products to achieve a high degree of alignment between rural financial services and urbanization.

Third, eliminate the confusion caused by the contest between insufficient effective financial services and illegal rural finance, and firmly establish the financial dominant position of rural financial institutions. At present, because rural financial institutions harbor the mentality of "valuing commerce over agriculture," many restructured small and medium-sized rural financial institutions have "washed their feet and come ashore," with a serious tendency to move away from agriculture in their services, leaving "weak areas" in services for agriculture, rural areas and farmers. This has opened the door to various illegal financial activities, which not only impact the normal operations of rural financial institutions and shake their solid position in supporting agriculture, but also erode the interests of agriculture, rural areas and farmers and affect the development of the rural industrial economy. To this end, governments at all levels and regulatory authorities should encourage rural financial institutions to "sink" their services downward. The Agricultural Bank of China may, on the basis of doing well in its "Agriculture, Rural Areas and Farmers Service Business Division," extend its institutions downward and return to rural areas below the county level to set up physical service outlets. At the same time, actively guide and develop various new types of rural financial cooperative organizations, strengthen the force of lawful rural financial organizations, enrich the means of rural financial services, and meet the diversified financial service needs of agriculture, rural areas and farmers. In addition, strictly crack down on illegal financial activities in rural areas. Financial regulatory authorities should establish a financial regulatory network in rural areas, strengthen supervision over financial activities in rural areas, ban all unlawful financial activities, and purify the rural financial environment.

Fourth, eliminate the confusion caused by the collision between traditional financial thinking and modern finance, and rebuild the service advantages of rural financial institutions. First, promptly improve the professional quality of employees and increase training for existing employees in new businesses and new knowledge. At the same time, increase the recruitment of new employees to change the unreasonable talent structure. Second, proactively learn from maturely managed joint-stock commercial banks, rebuild internal control mechanisms, accelerate the reform and transformation of the operating system, establish a modern bank operation and management mechanism as soon as possible, promote development through reform, and rebuild their own service advantages.