Advances in Studies about Rural Financial Poverty Alleviation from the Perspective of Targeted Poverty Alleviation

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1. Agricultural University of Hebei, Baoding 071001, China; 2. Hebei Provincial Poverty Alleviation and Development Office, Shijiazhuang 050010, China

1　Introduction

Poverty alleviation is a great project that needs to mobilize the forces of the entire society. Finance is the blood of the economy. Financial poverty alleviation is an essential part of the strategy system for poverty alleviation and development. It plays a decisive role in industrial poverty alleviation and comprehensive poverty alleviation. Without the involvement of financial funds, any poverty alleviation project will not succeed. Rural financial poverty alleviation can be summarized as follows: guided by government policies, taking financial system as the main support, guiding financial products and services through proper design of financial instrument and financial mechanism to flow to less developed areas, weak groups and low income groups, so as to help them develop their production, increase their income, obtain services, and realize rapid, better, and sustainable poverty alleviation. Rural financial poverty alleviation is an effective way to help the poor people in rural areas to get out of poverty and get rich, but there is still a long way to shake off poverty.

The 13th Five-Year Plan period is the decisive stage for building a well-off society in an all-round way. In the 13th Five-Year Plan period, it is required to accelerate the poverty alleviation and development, take special measures, strengthen poverty alleviation work, and make every effort to succeed in poverty alleviation work. Therefore, all walks of life should join the work of poverty alleviation. Among them, there are many research findings in rural financial poverty alleviation. In order to accelerate the poverty alleviation and provide references and recommendations for further development of theory and practice of financial poverty alleviation, we made an overview of the organization system, operation mechanism and service products of rural financial poverty alleviation, elaborated the development path of financial poverty alleviation, and came up with recommendations for financial poverty alleviation.

2　Organizational system of rural financial poverty alleviation

2.1OverviewofforeignstudiesForeign studies often divide financial institutions into three categories: commercial finance, cooperative finance and policy finance. Most studies focus on one of them, and there is little literature of systematic studies. Helms B[1]believed that non-government financial institutions are more favorable for poverty alleviation work, have stronger innovation capability, and closely integrate commercial resources to cover more poor farmers. Conning Jetal.[2]divided the way of farmers’ obtaining finance and insurance into formal financial institutions such as banks and credit cooperatives, and informal financial institutions such as private lending institutions. Both types of financial institutions have a positive role in rural economic development. Studies on cooperative finance are various and most studies focus on its role from a microscopic perspective. Robinson Metal.[3]held that the cooperation between rural cooperatives and farmers is not limited to financial support, but also provide farmers with agricultural assistance such as fertilizer and irrigation. Bonazzi Getal.[4]believed that rural cooperative financial institutions play an important role in the rural finance of the United States. Its role is not only reflected in the solution to the problem of decentralized agricultural development, but also in the improvement of the quality of agricultural products. If it is included into the evaluation system, it is able to further strengthen the credit capability and reduce financial constraints.

2.2OverviewofdomesticstudiesIn China, rural financial organizations for poverty alleviation can be roughly divided into five types: (i) policy-based financial institutions (agricultural development banks), (ii) large commercial financial institutions (agricultural banks and postal savings), (iii) small and micro commercial financial institutions (rural credit cooperatives, villages and towns Banks, poverty alleviation and micro-credit institutions), (iv) cooperative financial institutions (village-level mutual-aid organizations and industrial development mutual-aid cooperatives), (v) non-governmental financial institutions. Most of domestic literature came up with recommendations for sustainable development of China’s existing organizational system from the institutional point of view. In the opinion of Zhu Shumin[5], policy-based finance is a kind of system design adopted by the government to make up for the market failure and it plays a leading role in the poverty alleviation. It is of great significance to the building a well-off society in an all-round way. Agricultural Development Bank of China is the only agricultural policy-based financial institution in China. Under the current economic situation, Agricultural Development Bank of China should actively bring into play the leverage, provide funds for poverty-stricken areas, and bring endogenous force and development vitality for their economic growth. Zhao Maozhu[6]held that rural fund mutual cooperatives are suitable and feasible for rural markets. Rural fund mutual cooperatives play a significant role in alleviating rural financial demands, extending rural financial service radius, optimizing the allocation of rural financial resources, supporting the rural economic development, and promoting farmers’ income and credit awareness. Rural mutual fund cooperatives have advantages such as being close to their clients, low transaction and operating costs, simple procedures for handling business, flexible service methods and good disciplinary effect for dishonesty. According to the survey of Wang Xiao[7], the development of mutual cooperatives took on a fatigue state and did not realize self-sustainable development. It is believed that poverty alleviation fund mutual cooperatives need to broaden the financing channels and increase the loanable funds; strengthen the policy propaganda, cultivate farmers to participate; strengthen the mutual fund management; establish and improve the talent mechanism; appropriately increase occupancy rate in low-rate areas; actively explore the farmers’ willingness to borrow; promptly adjust relevant policies, rules and regulations, and make innovation in the development model.

3　Operation mechanism of rural financial poverty alleviation

3.1RuralfinancialpovertyalleviationmechanisminforeigncountriesAs for the rural poverty alleviation mechanism, although there is no unified system in the international academic circle, many valuable achievements have already been made. Some studies were made from the perspective of financial institutions. For example, in the study of Indian rural financial institutions, Efrem Garedewetal.[8]found that high operation cost of financial institutions is the major problem; they believed that the solution to the cost problem firstly lies in the inadequate market information, and they provided the approach, namely, attracting the social capital and introducing the credit evaluation. Debajit Palitetal.[9]analyzed four financial institutions in Asia from the operation mode, financial policy, incentive mechanism and financial performance, and found that the introduction of social mechanism reduced, to a certain extent, the transaction cost, increased the efficiency of poverty alleviation, and they stressed that the government participation can improve the sustainability of financial institutions. Some scholars conducted studies from the perspective of poor farmers. For example, Amit Ketal.[10]studied the risk tolerance ability of farmers, and believed that it is necessary to establish a fair, easy-to-implement and supervisory rules and regulations in the financial poverty alleviation process. In addition, it is necessary to constantly increase the operation efficiency of financial institutions, and bring into play the functions of financial support.

3.2RuralfinancialpovertyalleviationmechanisminChina

Many domestic scholars put forward different suggestions on the establishment of financial poverty alleviation mechanism. Huang Shaojinetal.[11]established a theoretical analysis model of farmer credit supporting agriculture. They used the propensity score matching (PSM) to make the empirical analysis and reached the conclusion: farmer credit mechanism has a significant incentive effect on farmer income growth and obviously accelerates farmer income increase, and the incentive effect is related to the income level, credit level and credit usage of farmers. The higher the income level and credit level of farmers, the more obvious the incentive effect of the credit mechanism; besides, when farmer loans are used for operating inputs, incentives for farmer credit are better. Therefore, financial targeted poverty alleviation must be based on construction of farmer credit channel and mechanism, lay stress on the rural credit system construction, and attach great importance to mutual promotion of increasing farmers’ income level and bringing into play the function of financial poverty alleviation. From behavioral psychology of poor farmers, Huang Yingjunetal.[12]analyzed the financial poverty alleviation mechanism, stressed that financial poverty alleviation should pay attention to precise identification, grasp the psychological demands of poor farmers, and strengthen financial participation of poor farmers. Using the financial psychological account, they plotted a model map of regional poverty trap, analyzed the impact of financial effects on the poverty alleviation, and stated that it is very important and necessary to set proper financial targeted poverty alleviation mechanism. This mechanism should be a financial buffer mechanism with overall functions. It plays a connecting role between the government and poor farmers in the vertical direction and serves to integrate the resources of various financial institutions in a horizontal direction. In this institution, the government should play a role of inducing incentives, and it is required to give full play to the overall financial support for poverty alleviation functions of government planning and market participation, coordinate and integrate various financial resources and mobilize the subjective initiative of the poor families to get out of poverty.

4　Rural financial poverty alleviation service products

4.1SmallloanofruralpovertyalleviationFrom the perspective of the borrowers, Karla DS[13]analyzed the group loan is an effective method for increasing the rate of return, group members can mutually supervise each other, implement joint guarantee policy, so as to reduce the default rate of small loan of poor group members, realize better supervision effect and low supervision costs. In addition, similar cultural and geographical background will make the group loans have better effect. Some scholars also carried out studies from the perspective of the lender. For example, Mersland Retal.[14]found that group loans are not proportional to the returns of small-loan enterprises but directly proportional to the extension of services. The large-scale implementation of corporate loans has adversely affected the financial sustainability of small-loan enterprises. Therefore, if we want to increase the return on assets of small-loan enterprises, we need to increase individual micro-loans and reduce the group loans. Wang Xuebin[15]found that the participation of grassroots organizations in micro credit helps realization of capitals to flow to rural areas, but the distribution of profit leads to poor effect of poverty alleviation, and the occurrence of dilemma of poverty alleviation moving forward. Wang Yijie[16]divided the major model of micro credit mortgage guarantee of poverty alleviation into mortgage-free micro-credit model, credit model of providing mortgage guarantee with special poverty alleviation funds, and the credit model of providing mortgage guarantee with property right of farmers. It is believed that the system of property rights in rural areas should be innovated, the system of supporting the return of assets of poor people should be actively explored, and the scope of collaterals for poverty alleviation credit should be broadened. According to the survey of Xie Yumeietal.[17], "the rich and the poor are bundled together", which uses social capital to replace the mortgage, include the poor farmers into joint guarantee group, and implement the contract through the peer pressure, and the "interaction between banks and insurance companies" introduced the insurance in the operation of micro credit and reduced the credit risk. These innovations provide a good solution to the problem of targeting and managing risk for poverty alleviation micro credit. However, the study found that effective demands of poor farmers for production loan are insufficient and conflict between poverty alleviation targets and profit target are problems to be stressed in the current micro credit. In the process of poverty alleviation, it is required to make clear the poverty reasons and degrees, take direct fund support for poor farmers without the ability of increasing the income, and adopt the credit support for poor farmers with the ability of increasing the income. In some areas, the demands for productive loan are low. Thus, it is possible to increase the loan demands through granting some poverty alleviation discount loans to those loan income farmers with the repayment ability.

4.2Ruralpovertyalleviationmutual-aidfundsUsing Heckman’s two-stage sample selection model, Dong Xiaolinetal.[18]made an empirical study on the accuracy of village-level mutual-aid funds aiming at the poverty and factors affecting farmers’ participation and utilization, and main people benefited from mutual-aid funds were concentrated on middle and low income farmers, not fully covering the poorest farmers. Compared with the traditional financial poverty alleviation, although mutual-aid fund service targets have sank and achieved some results, it failed to cover the poorest farmers, the income gap between the poorest farmers and other farmers is widening, which increases the intensity and depth of poverty and affects the effect of poverty alleviation.

4.3OtherinnovationsofruralfinancialproductsHua Hongyietal.[19]found that poverty alleviation loans in the development process have been subject to certain constraints, mainly due to the lack of guarantee policies, may financial institutions are reluctant to lend money. At the same time, they proposed the design of debt financing model of poverty alleviation financing guarantee fund, put together the industrial poverty alleviation funds allocated by future installments in the form of bond issuance, raise funds to establish guarantee fund for poverty alleviation financing, guarantee loans for industrial construction in poverty-stricken counties, leverage the bank credit funds at the ratio of 1∶8, attract banks to participate in the poverty alleviation, expand the scale of poverty alleviation funds, and realize the combination of financial policies and financial services. Besides, it is recommended to take a part of industrial poverty alleviation funds as the main source of repayment, make the financing have more guarantee, and improve the effect of poverty alleviation and development. Lu Mingningetal.[20]held that it is required to establish the insurance mechanism to prevent risk losses. Through the use of credit transaction contract model, adding the factor of "agricultural loan insurance" to the analysis model, they found that it not only improved the enthusiasm of financial institutions for lending, but also lowered the financing threshold for poor farmers obtaining the start-up loans. Further improving the operation mechanism of agricultural insurance in rural poverty-stricken areas can increase the coverage of agricultural insurance in rural poverty-stricken areas and help farmers to enhance their ability of resisting natural risks and minimizing the chances of farmers returning to poverty.

5　Development paths of financial poverty alleviation: inclusive financial poverty alleviation

In the bookBuildingInclusiveFinancialSectorsforDevelopmentissued by the United Nations, the concept of inclusive financial poverty alleviation was formally put forward. It started advocating countries to actively establish a special system that can provide services for social classes and groups, especially poor people, in an effective and all-round manner, namely, the inclusive financial system, to make the group that has been excluded from the normal financial service system for a time obtain financial services. On this basis, ASLIetal.[21]summarized the main objectives of inclusive finance and gave an indirect definition of financial inclusion. They pointed out that inclusive finance aims to promote coordinated and sustainable development of social subjects. Satpathy Ietal.[22]believed that it is an arduous task for a country to achieve inclusive growth and development and build an inclusive finance, and it requires participation and concerted effort of many parties. In this process, the bank plays a pillar role, for example, the modern bank payment system can meet various remittance demands, and various types of retail loans such as personal loans, auto loans, student loans and housing loans. Therefore, it is a useful project for banks and weak groups.

The studies in China mainly focus on the correlation between inclusive finance and poverty alleviation. The results have shown that inclusive finance plays an important role in poverty alleviation. According to the study of Luo Sidanetal.[23], the relationship between inclusive finance and poverty reduction in China is not a simple linear relationship, but presents a U shape. In other words, in the effect of poverty alleviation, there is optimal inclusive financial development level. The inclusive financial development has significant threshold characteristics for the poverty alleviation. The effect of inclusive finance on poverty alleviation increases with increase of the per capita income level. The government should formulate different inclusive financial development strategies for different regions to solve the problem of financing constraints according to local conditions, and should actively take measures to improve the economic development, education and infrastructure level, and increase the financial input to agriculture. Using the vector regression model (VAR) measurement method, Li Haihui[24]carried out an empirical study and found that there is a long term equilibrium relationship between the development of inclusive finance and the income distribution gap among rural residents, and the improvement of inclusive finance development level can narrow the income gap among rural residents. The effect of increase in the degree of rural inclusive finance on the income gap among rural residents is not obvious in the short term. In the long term, it will play a significant positive role in improving the income distribution of residents, indicating that financial development with the connotation of inclusive finance has greater effect on the poverty alleviation in rural areas than the sum of exclusion effect brought by traditional financial development. Using the Pearson correlation test, Li Ke[25]carried out a correlation analysis on the level of inclusive finance and the level of poverty, and found that the poverty would be significantly improved with the increase in the inclusive finance, which further demonstrates the rationality of slowing the regional poverty through building rural inclusive financial system. The successful practice of all inclusive poverty alleviation models needs necessary preconditions. It is recommended to select proper operation mode according to the characteristics of the regions, and further improve preconditions for various models. If ignoring the regional difference and taking unified operation mode to promote the implementation of inclusive finance in the whole country, it may impede the advance of the poverty alleviation project. Luo Junren[26]proposed bringing into play the advantages of the Internet + inclusive financial advantages, eliminating distance disadvantage, and reducing service costs. Internet finance is a new field based on the innovation of the traditional financial industry and integrating the financial industry with the Internet. The development of Internet and mobile banking can promote the realization of objective of inclusive finance, reform the traditional financial payment tool, remove the barrier of the existing financial development system, and attract more private capitals to participate in the construction of the financial system through the Internet +, to form full competition of financial market and benefit more groups.

6　Recommendations

(i) Strengthening the studies of rural financial poverty alleviation from the microscopic perspective. Most of the existing studies have carried out macroscopic studies from financial institutions, while few studied other roles of poor farmers and enterprises in financial poverty alleviation. In the future, more studies can be made on the demands and behavioral characteristics of poor farmers and enterprises. Analyzing the rural financial system from the microscopic point of view can improve the rural financial system, enhance the financial support for poverty alleviation, and come up with more pertinent and practical policies.

(ii) Undertaking studies on the efficiency of rural financial poverty alleviation. Foreign literature mainly discusses the capital utilization efficiency and operational efficiency of rural financial institutions from an empirical point of view, while the domestic literature is little and mainly discusses from a macroscopic perspective. There is a lack of close logical connection between theoretical and empirical interpretation. Therefore, it is recommended to learn from foreign empirical experiences and combine with domestic theories.

(iii) Effectively developing local financial institutions and treating the relationship between these organizations and other types of financial institutions from the perspective of targeted poverty alleviation. Rural financial development of China is completely different from foreign countries. Thus, we can not copy experience of foreign countries. It is recommended to come up with practical and feasible solutions according to special conditions of rural areas in China, so as to establish an effective connection with these financial institutions and reach the purpose of coordinated development.

(iv) Extending the fields of studies on rural financial poverty alleviation. The studies on financial poverty alleviation in China still have many deficiencies in system construction and empirical studies. It is recommended to strengthen the practice, obtain more direct data and information, learn international experience, combine with national conditions of China, and improve China’s studies on rural financial poverty alleviation from a multiple perspective.

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