Study on Chinese Microfinance Company and Rural Development

The purpose of microfinance in China is to expand the provision of loans to farmers, individual owners and micro enterprises. In China, the finance institution is more concerned about the city than the rural for a long time. Even the rural banks, such as China Agriculture Bank and Rural Credit Cooperative Company, mainly moved the funds of rural to the city instead of helping the farmers. So in the vast rural areas, financial service is missing and capital is shortage in China. The state wants to guide private capital flows to rural and underdeveloped areas in order to improve financial services there. With establishing microfinance, farmers’ income and rural economy can be promoted. This study found that microfinance companies did promote the development of rural areas. Chinese microfinance created a unique development model in the development process which helps farmers a lot. The results of the regression show that the funds of China’s microfinance companies flow to the countryside, to make up for the lack of rural financial situation for the “three rural” (agriculture, rural areas, farmers). The microfinance companies provide funding and greatly improve the peasant’s expenditure, which achieve the intended target. Further study found that microfinance companies have made such a good achievement in promoting rural development, mainly because they provide funds that are in line with China’s reality.