How can the new type of rural cooperative finance be traced back and restructured?
The three stages of China's rural cooperative finance reform
The first stage was from 1997 to 2003, when various commercial banks gradually withdrew from the countryside, the Agricultural Development Bank evolved into a policy institution dedicated to serving grain, cotton and oil procurement, and rural cooperative finance either became alienated or was shut down. Under such circumstances, in theory there were doubts about the soil in which cooperative finance could survive.
The second stage was from 2003 to 2013, when large banks rebuilt their departments for agriculture, rural areas and farmers or their small and medium-sized and micro financial departments, and new financial or quasi-financial organizations such as village and township banks, microcredit companies, financing guarantee companies and mutual fund cooperatives developed.
The third stage began in 2014, when the No. 1 Central Document once again proposed a new type of rural cooperative finance. On the basis of farmers' cooperatives and supply and marketing cooperatives with democratic management, standardized operation and strong driving force, rural cooperative finance should be cultivated and developed, and the types of financial institutions in rural areas should be continuously enriched. Adhering to the principles of the membership system and closure, and on the premise of not absorbing deposits or granting loans externally and not paying fixed returns, the development of community-based rural mutual fund organizations should be promoted. This affirmed the role of cooperative finance in the rural financial system.
The re-proposal of a new type of rural cooperative finance can, to a certain extent, make up for the deficiencies in China's rural financial services. For rural finance to play a role, the basic characteristics of the rural economy must be taken into account. Different stages of rural economic development give rise to different rural financial needs, and the corresponding rural financial supply system should also change accordingly. Based on the characteristics of China's rural smallholder economy, cooperative financial institutions should be vigorously developed and commercial finance should be developed to an appropriate extent.
The connotation and development basis of the new type of rural cooperative finance
The so-called “new type” of rural cooperative financial organization is different from traditional cooperative finance and is in fact a re-proposal and elevation of the characteristics of cooperative finance. Members are the “masters” of cooperative finance, that is, cooperative members have the dual attributes of customers and owners; credit cooperatives implement the one-person-one-vote system rather than voting according to equity shares; part of a cooperative's profits is used for public accumulation (generally not distributed), and the remaining part is distributed according to shares and services, whereas a joint-stock system can only distribute according to shares. As a cooperative financial institutional arrangement, the new type of rural cooperative finance faces the reality of the absence of rural financial functions in China and the credit characteristics of a society of acquaintances.
The credit characteristics of China's rural areas are mainly manifested as credit in a society of acquaintances, that is, credit linked by interpersonal relationships, which from the perspective of information belongs to soft information. Commercial financial institutions, however, often value explicit factors such as borrowers' collateral and credit status, which leads to the inability of commercial finance to effectively serve the rural economy. Cooperative finance is an institutional arrangement endogenous to the rural economy, and the credit and reputation mechanisms of a rural society of acquaintances provide informal institutional conditions for the development of cooperative finance. Cooperative finance reduces the transaction costs of financing through blood, geographical and business relationships, and can achieve sound development.
The basis for the development of cooperative finance is industrial operation. At present, various farmers' professional cooperatives in China are emerging in large numbers. Professional cooperatives need unified purchasing and marketing, and in the process of unified purchasing and marketing, credit purchases and credit sales often occur, giving rise to commercial credit, and commercial credit has the possibility of deriving into financial credit. If cooperative finance can be endogenous to the cooperative economy, then it can better achieve the symbiosis of rural finance and the rural economy, for example, cooperative finance “breaking out of the cocoon” from professional cooperatives and supply and marketing cooperatives.
The characteristics of private financing are suited to cooperative finance. First, it is asset-light and often does not consider collateral. Second, it is data-light and often does not require structured data to be provided in the way formal finance does. We believe that private financing actually has a “central database,” which is a judgment formed by a society of acquaintances over many years of accumulation. Finally, there is information symmetry: the entire process of fund operation is a collective act, and there is no information asymmetry. So how can cooperative finance replace private financing and exist? Because the interest rate of cooperative finance is lower than that of private financing, which embodies the spirit of mutual aid.
Six models of the new type of rural cooperative finance
By reviewing the successful experience of international cooperative finance, we find that the reason for its success lies in adhering to the spirit of mutual aid and voluntariness and mainly serving members. At the same time, in order to achieve the sustainable development of cooperative finance, it is necessary to commercialize externally and introduce external supervision.
In terms of funding sources, a commitment system can be used; in terms of fund returns, returns on shares and returns on transaction volume each account for a certain percentage, embodying the spirit of mutual aid and cooperation; in terms of financial supervision, supervision from the banks with which it cooperates and regulation by local financial bureaus are needed, but attention must be paid to the regulatory boundaries of different supervisory entities.
We believe that the new type of rural cooperative finance can have six models: the cooperative finance + farmers' professional cooperative model; the cooperative finance + commercial finance model, which gives cooperative finance a sustained source of funds; cooperative finance + internet agricultural commerce platform, which will further reduce the transaction costs of cooperative finance and expand its boundaries; the mobile operator-initiated model, through which mobile operators, by means of mobile phone contacts and call and text message records, actually grasp users' core interpersonal relationship networks and can supervise individuals, and thereby have a certain supervisory capacity over cooperative finance itself; the Agricultural Bank of China and Postal Savings Bank-initiated model, utilizing their advantages in funds and outlets; and the temple-initiated model, since temples have a certain capacity for mobilizing funds and managing risk.