- Email: [email protected]
Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank in Heilongjiang Province
December 2015
ScienceDirect
Vol. 22 No. 4 75-82
Journal of Northeast Agricultural University (English Edition)
Available online at www.sciencedirect.com
Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank in Heilongjiang Province Wang Shuang1, Wang Ji-heng1*, Liu Bing2, and Yu Xiao-wen1 1
College of Economics and Management, Northeast Agricultural University, Harbin 150030, China
2
College of Applied Foreign Languages, Heilongjiang University, Harbin 150080, China
Abstract: This paper summarized the management models of village banks in China. We compared and analyzed different management models of four village banks in different regions on four aspects: regional agriculture feature, loan for farmers, loan for enterprises and the construction of network, then came to the conclusion that, if the village banks' health development can realize, they must pay attention to innovating in loan patterns as well as material loan and starting out the network development. Key words: village bank, management model, premier choice CLC number: F830
Document code: A
Article ID: 1006-8104(2015)-04-0075-08
BBC and super efficiency model, and Jia (2013)
Introduction
constructed the evaluation index system of village
In recent years, village banks have been developing
their operation efficiency. Thirdly, Hu (2013) and
rapidly as a new type of rural financial institution.
Zhang (2014) focused on the financial products and
Business model analysis plays an important role in the
service modes, which provided suggestions for the
development of village banks. Through management
development of rural economy.
model analysis, village banks realized the problems
On the other hand, demerits of researches on the
existing in the process of development, promoted
development of village banks still exist. Firstly, the
village banks' innovation in the area of management
foreign scholars mainly focused on the management
modes and helped village banks play a competitive
models of village banks in developed countries, the
role in agriculture. The domestic scholars' researches
effective management models didn't apply to China's
on the village banks mainly focus on the following
village banks. Secondly, the existing literatures focused
aspects. Firstly, Qu (2013) proposed to solve the
on the solutions and suggestions, which couldn't reflect
problems of village banks, such as low awareness, but
the problems of village banks. This paper took Bayan
they had difficulties in raising capital and shortage
Rongxing Village Bank as the object, summarized
of professionals. Secondly, researchers took the
the management models of village banks in China.
mathematics methods to study the operation efficiency
We chose four village banks' management models in
of village banks, for instance, Wu (2013) used CCR,
different areas. We compared and analyzed from the
banks based on the perspective of AHP to evaluate
Received 1 May 2015 Supported by the Philosophy and Social Science Project in Heilongjiang Province (14B074) Wang Shuang (1991-), female, Master, engaged in the research of rural finance. E-mail: [email protected] * Corresponding author: Wang Ji-heng, professor, supervisor of Ph. D student, engaged in the research of rural finance. E-mail: [email protected] http: //publish.neau.edu.cn
·76·
Vol. 22 No. 4 2015
Journal of Northeast Agricultural University (English Edition)
characteristics of agriculture, loans to farmers, loans to
rapidly. Secondly, village banks have weaknesses.
enterprises and the constitution of network, in order to
Village banks mainly focus on the groups of individual
promote the rural economy.
households, small and medium-sized enterprises and low-income people. According to customers' features,
Connotation and Characteristics of Sustainable Development Management Model of Village Bank
village banks will provide different kinds of services to
Connotation of sustainable development
process. Thirdly, village banks' funds are confined in
management mode of village bank
rural areas. The differences between village banks and
The sustainable development of village banks is in
commercial banks are that village banks take deposits,
the process of pursuing self survival and sustainable
which will be invested in the area they serve. It is a
development. We should develop and make full use
good way to serve for local economic development
of resources. It is not only necessary to consider the
and prevent the outflow of funds. Nevertheless, the
goals of village banks and their market positions,
commercial banks take resident deposits and invest
but also to maintain the profit growth in the field of
in the developed areas, to some extent, ignoring the
competition existing and future expansion of business
development of rural economy.
meet demands of their customers and make full use of the advantages of information, effectively avoiding the problem of inappropriate information in the financing
environment. In general, the management models of village banks are the same as that of the commercial banks. However, according to different situations of each region, the management models of village banks are different.
Categories of Current Sustainable Development Management Model of Village Banks Village banks are founded in different areas, thus
Characteristics of sustainable development
management models are different. We mainly
management mode of village bank
summarized three typical management models, taking
Firstly, village banks have small scale of operation
Sichuan Yilong Huimin Village Bank, Jilin Zhenlai
and simple form of organizations. Village banks are
Guokai Village Bank and Dazu HSBC Village Bank
founded in rural areas, therefore, village banks serve
for examples, then provided some references for
for farmers in rural areas, where there are fewer
village banks (Ji et al., 2012; Lv, 2010; Liao, 2010)
branches, thus business decisions can be made more
(Table 1).
Table 1 Categories of current sustainable development management model of village banks Category
Bank+Fund cooperative
Representative bank Sichuan Yilong Huimin Village Bank
Farmer+Enterprise+Bank+Government Jilin Zhenlai Guokai Village Bank
Dazu HSBC Village Bank
Typical mode
Cooperation mode
Operation mode
Through participation in farmers cooperative fund, this village bank provided technical support and let retail business operate in bulk
With a well-deserved reputation, government guided farmers to participate in agricultural projects and this village bank provided financial services for enterprises
Dazu HSBC Village Bank loaned to farmers and enterprises through it relies on long term cooperation
Advantage
1. Expanded farmers cooperative fund and improved benefited range 2. Reduced village banks' operating costs and improved their work efficiency
1. Fund cycle inter-system is able to prevent from credit risk and increase security of village banks 2. Mode solved problems and improved visibility of village banks
1. By using originator's ability to achieve its own development 2. Having flexible repayment methods to loan mature
E-mail: [email protected]
Quaternity mode
Company+Household Supply chain mode of loan
Wang shuang et al. Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank
·77·
Table 2 reflected Yilong Huimin Village Bank's
can reduce the risk of Yilong Huimin Village Bank
deposit and loan data in 2007-2011. The profit of
and improve its efficiency as well, make convenient
Yilong Huimin Village Bank had been increasing
for farmers in daily life and provide funds. As a new
rapidly since 2007. The achievement was bounded
type of rural financial institution, Yilong Huimin
by its effective management model. This "Bank+
Village Bank would pour more fresh blood to local
Fund Cooperatives" mode of cooperation has served
economic development and play a positive role in rural
thousands of farmers as its clients, to some extent, it
economy.
Table 2 Deposit and loan data in 2007-2011 (Units: ten thousand RMB) Year 2007
Total asset 1 500
Balance of deposit
Balance of loan
Profit
394.1
144
–20
2008
7 700
4 702
2 869
31
2009
22 800
19 795
11 595
346
2010
47 000
24 832
18 831
1 352
2011
11 500
102 500
49 000
3 836
Data sources: Sichuan Financial Network.
development is unbalanced and the North-South gap
Comparison of Four Village Banks' Management Models
continues widening in China. We took Bayan Rong-
Village bank is a new rural financial institution which
Village Bank for examples and compared their
is responsible for its own profit and loss. It aims to
economic situations, then proceeded to summarize
serve the agriculture, rural areas and farmers. There are
the advantages and disadvantages of Bayan Rongxing
distinctions in management models because economic
Village Bank (Table 3).
xing Village Bank, Sichuan Yilong Huimin Village Bank, Baoshang Village Bank and Shanxi Ansai
Table 3 Comparison of four village banks' management models
Comparative bank
Bayan Rongxing Village Bank
Sichuan Yilong Huimin Village Bank
Baoshang Village Bank
Ansai Village Bank
Agricultural characteristic
Rice, soybean, corn, commodity grain, pig
Wheat, rape, soybean, commodity base
Intensive livestock industry
Wheat, bean, pig, cattle, sheep
Loan to farmer
Five or three families joint guaranteek government and bank cooperation
Provide money for the fund cooperatives, government and bank cooperation
Provide pasture management, cooperative economic organization loan to farmers
Concentrate in industries within region of loan; government and bank cooperate
Composite mode
Tala micro loan system
Support funds to regional industry chain
Loan to enterprise
Traditional mode
Network construction
No
No
Yes
No
Agency business
Act Harbin Bank's financial products
No
No
No
http: //publish.neau.edu.cn
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Journal of Northeast Agricultural University (English Edition)
Vol. 22 No. 4 2015
Bayan Rongxing Village Bank was founded
the two batches of leaflets and so on. Thirdly,
by Harbin Bank in Heilongjiang Province, which
Bayan Rongxing Village Bank tried to seek develop-
expanded its business actively and started agricultural
ment in different ways, but one that could not be
loans in 61 administrative villages, 12 towns and 121
ignored was carrying out the agency business. Bayan
natural villages. It provided agricultural loans about
Rongxing Village Bank sold the financial products
830 000 000 RMB and benefited 31 000 households.
of Harbin Bank and Industrial Bank, which not only
The amount of loan to five small and micro enterprises
diversified the type of service, accelerated the speed
reached 4 850 000 RMB. The village banks supported
of development, but also benefited to clients and let
229 individual business, the loans reached 40 930 000
them join into the financial boom. Drawbacks were
RMB. Bayan Rongxing Village bank paid more and
as follows. Firstly, Bayan Rongxing Village Bank
more attention to expend kinds of loans as well as
was lacking of collateral (Li, 2010; Tian, 2012). It
house mortgages, which included loans to women
mainly implemented the five-household and three-
for their running business, re-employment of laid-off
household joint guaranty and sold fewer. Unlike other
business loans, put salaries up for collateral and so
three village banks' management modes, Baoshang
on. As the credit for village banks' excellent business,
Village Bank had the pasture management authority
at the second Chinese Micro Finance Institutions
as collateral (Wang, 2011). Although Heilongjiang
Association Annual Meeting in 2012, it was awarded
Province has implemented the mortgage of land
the "most social responsibility award".
management right and land use right in individual
By comparing with other village banks, the
pilot areas, it hadn't been implemented in larger areas
advantages of Bayan Rongxing Village Bank were
yet, to some extent, it had restricted the farmers' and
reflected in the following aspects. Firstly, Bayan
enterprises' demands. Secondly, Bayan Rongxing
Rongxing Village Bank focused on agricultural
Village Bank's website construction wasn't satisfied.
loans. The loans aimed at individual farmers and the
Among the four village banks, only Baoshang Village
proportion of agricultural loan reached 90%, differing
Bank had built website, making it convenient for
from other three village banks. As Bayan Rongxing
customers to understand its information. That was
Village Bank had more individual investors and fewer
where Bayan Rongxing Village Bank should learn
medium-sized enterprises, it should seize the key to
from Baoshang Village Bank. While paying attention
practice the effective method and increase lending
to the market, Bayan Rongxing Village Bank should
efforts. In accordance with the door-to-door viewing
not ignore the construction of website for it was an
time, loan object, speech and deportment occasions
important channel for customers to understand the
to reduce Bayan Rongxing Village Bank's non-
village bank.
performing loan ratio. Secondly, Bayan Rongxing Village Bank focused on the market. Market played a very important role for this bank. Bayan Rongxing Village Bank used a variety of means to serve clients. Credit clerks did interviews, by which they
Premier Choice of Bayan Rongxing Village Bank Sustainable Management Model
understood the basic situation of household loans
Comparing with other three banks, Bayan Rongxing
and visited important customers regularly, appointed
Village Bank lacked scientific cooperation mode,
an expert management to collect information of clients
as well as website construction. In view of the
and enhanced communication. Bayan Rongxing
existing problems, we put forward some reasonable
Village Bank also broadcasted TV advertisements,
suggestions to promote Bayan Rongxing Village
hanged the lamp-post advertising and handed out
Banks' development (Table 3).
E-mail: [email protected]
Wang shuang et al. Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank
·79·
become the "accessory" and miss the opportunity to Financial environment construction
develop freely and subject to government instructions.
During the investigation, we found that the govern-
In this aspect, Bayan Rongxing Village Bank should
ment supported Bayan Rongxing Village Bank's
do the preparatory work before the government takes
development, but there were no specific clauses
shares, the government should strictly control the
to guide it, and the government made few efforts
proportion of shares and make it play its own role in
to support it, there were few fiscal deposits in
the development (Sun, 2012).
Bayan Rongxing Village Bank and most of them were deposited in commercial banks. What's more,
Carrying out "Bank+Enterprise+Cooperative"
although Bayan Rongxing Village Bank was weaken
model
in absorbing funds, the tax amount was very huge
Bayan County had the title of "the NO.1 pig-breeding
and it brought great pressure to the development of
country", the output quantity was very considerable
Bayan Rongxing Village Bank that it paid 13% deposit
and it focused on meat processing. There were five
reserve (45 000 000 RMB). At the same time, the
large food groups in total. Shuanghui and Yurun Group
local Banking Regulatory Bureau was also intensive.
pig breeding, slaughtering and processing settled in
Bayan Rongxing Village Bank had to survive under
2012. Although Bayan Rongxing Village Bank has
the pressure of the government, the People's Bank of
limited money to large enterprises, the maximum loan
China and Banking Regulatory Bureau.
amount can't exceed 10% of the registered capital
To construct a good financial environment, firstly
(5 000 000 RMB), it should seize the opportunity to
Bayan Rongxing Village Bank should pay attention
develop, create mutual win-win cooperation mode
to implementing environmental construction, with a
as an innovation with five new cooperatives. Bayan
good governance structure and incentive mechanism.
Rongxing Village Bank can refer to Sichuan Yilong
Uncertain and imperfect factors still exist in rural
Huimin Village Bank's management model and find an
area, the government's policy support and financial
effective road to develop.
regulatory measures played a "wind vane" role in the
The government plays an important role, whose
development of Bayan Rongxing Village Bank, which
responsibility is to form an actively cooperation
will make it develop quickly (Zhang, 2010). Bayan
between Bayan Rongxing Village Bank and enter-
Rongxing Village Bank should maintain a good long-
prises. The Third Plenary Session of 18 pointed out
term cooperative relationship with the government.
to encourage rural cooperative economy, the govern-
The government can become a shareholder of this
ment may actively encourage farmers to cooperate
village bank to support and pay tax ratio deposit to
with others in the unit of villages. Bayan Xingtai
it. This process not only suppresses the situation that
and Fengyuan Farmers Specialized Cooperatives
commercial banks with funds, but do not develop
Association were established by four pig farming
business in rural area, while village banks extend
cooperatives. On the other hand, Bayan Longyu
agricultural business but suffer from the status that
Planting Professional Cooperatives brought abundant
they have no money. Take the government's reputation
raw material resources to the local meat processing
as a brand, change the public idea that Bayan
enterprises. The enterprises and cooperatives not only
Rongxing Village Bank is a personal bank. It is a good
adjust pigs' price, but also guarantee the stability of
approach for Bayan Rongxing Village Bank to deposit
the supply of enterprises. In order to solve the problem
and vigorously devote great efforts to loan business.
that Bayan Rongxing Village Bank loans to large
But if the government becomes a shareholder in Bayan
enterprises unactively, it should carry out the loan
Rongxing Village Bank, to a certain extent, it will
business actively, for the part that it couldn't meet http: //publish.neau.edu.cn
·80·
Journal of Northeast Agricultural University (English Edition)
Vol. 22 No. 4 2015
customers' demands, it should turn to its original bank
explain the transaction processes, provide mortgage
for help, then it played the agent's duty (Table 3).
registration and handle disputes, at the same time, Bayan Rongxing Village Bank can make use of this
Carrying out "separation of mortgage" model
platform for integration resources, establish agri-
The Third Plenary Session of 18 had brought an
cultural loan mortgage service stations and solve the
opportunity to develop rural finance. The "Decision"
problems of agricultural loans while reducing the
that the Central Committee of the Communist Party
business risk and the rate of bad loans.
of China had deepen the reform of some major issues that ensured farmers' homestead usufructuary
Focusing on network construction
rights, reformed the rural system, chose some pilots,
The village banks' websites can reflect the multiple
carefully and steadily pushed forward the housing
plates about them, for example, dynamic information,
property rights, guaranteed farmers' rights. It would
organization frame, management status, financial
help to alleviate problems, explore the channels for
products etc., as well as increasing clients' awarenesses
peasants to increase property income and promote
of credit product, making it convenient for clients
the development of personal financial service in rural
to download the loan application. Therefore, Bayan
areas.
Rongxing Village Bank should absorb the advantages
Agricultural loans almost took 90% of the total loan
of Baoshang Village Bank, actively carry out the
in Bayan Rongxing Village Bank's loans accounted.
construction of website (Table 3). Considering the
In addition to reduce the proportion issued to agricul-
present situation, Bayan Rongxing Village Bank
tural loans of Agricultural Bank gradually, the lending
and Xinglong branch need to improve the hardware
rate of Bayang Rongxing Village Bank was lower
equipment. System development and maintenance
than other banks. If Bayan Rongxing Village Bank
need to be conducted under the guidance of the
intends to improve the present situation and has
original bank in order to enhance the visibility
difficulties in financing, the innovation of collateral
of Bayan Rongxing Village Bank. The website
would be a good way, instead of relying on credit
construction of Bayan Rongxing Village Bank is
loan. Heilongjiang Province has vast territory and
important, which provides the platform and security
abundant resources, Bayan County is the center of
for the development of network payment system. The
corn and soybean planting, Bayan Rongxing Village
website construction can not only make convenience
Bank should follow the policy of the Third Plenary
for the business process, but also for customers.
Session of 18 and take this opportunity to innovate
Therefore, Bayan Rongxing Village Bank should
loan mode which based on the original loan mode
keep up with the pace of other village banks. Bayan
(Table 3). It should formulate farmers' land scientifi-
Rongxing Village Bank shouldn't ignore the network
cally, ensure that Bayan Rongxing Village Bank
construction while there's less business. Strengthening
provide this service to clients in time and make steps
the construction of website can give information to
to carry out the "three rights". The government should
clients and promote Bayan Rongxing Village Bank's
carry out the "three rights" certificates, clear the right
development.
of contracted management of rural land, forest right and rural residents housing property, which can
Joining payment and settlement system
not only define ownership and ease the right of
In recent years, the network provides convenience to
management, but also promote the reform of rural
the residents. The development of China's financial
financial system. The government should establish
industry comes along with the support of network.
a property of trading platform right in the village,
Most banks joined the unionpay system and debit
E-mail: [email protected]
Wang shuang et al. Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank
·81·
card which influenced residents' life deeply. But for
village banks are using the first mode, there is a
village banks, the bank card business is very difficult
problem that original bank is loath to be an agent for
that people can only take passbook to apply for a
occupying the parent bank capital. At the present,
bank card. "The People's Bank of China, the China
Bayan Rongxing Village Bank should improve the
Banking Regulatory Commission about village
hardware equipment, the recruitment of technical
banks, loan companies, rural mutual cooperatives,
personnel, determine the credit risk prevention, then
loan company related policy" made provision for
it must coordinate with the original bank to take part
payment and settlement management. The four types
in its pay system and pay amount of agency fees. If
of institutions had the conditions to be added to RMB
Bayan Rongxing Village Bank has the ability to join
bank settlement account management system and
payment system and develop the system, it will open
network check of citizen identity information system
bank card application by itself. Bayan Rongxing
in accordance with the relevant provisions of the
Village Bank should not avoid reform because of its
People's Bank of China. In line with the conditions of
small size and weak technical conditions. It doesn't
village banks, they can join the large amount payment
have the basic functions if Bayan Rongxing Village
system, in accordance with the relevant provisions of
Bank has no Alipay, online payment, POS machine
People's Bank of China's micro payment system and
and ATM machine. Only with scientific and rational
the image exchange system, but the document didn't
reforms can Bayan Rongxing Village Bank make
point out that in which conditions village banks could
contributions to the local economy and achieve better
be consistent to join the large amount payment system.
development.
What's more, village banks could't print notes, issue bank cards or exchange between banks directly. To some extent, all these would make the village banks
Conclusions
lose the most basic functions. At present, Bayan
By summing up the sustainable development
Rongxing Village Bank still adopts the traditional
management models of village banks in different
way for the residents to deposit service, thus it doesn't
regions in China, taking examples of Bayan Rongxing
charge fees. This approach not only limits Bayan
Village Bank in Heilongjiang Province, Sichuan
Rongxing Village Bank's deposit and quantity of loan
Yilong Huimin Village Bank, Baoshang Village
business, but also makes inhabitants inconvenient.
Bank and Ansai Village Bank, we pointed out that
Now problems of small scale, weak technical force and
innovation was important in the operation mode
risk control abilities etc. still exist in Bayan Rongxing
of village banks. Village banks brought successful
Village Bank. Village banks have no direct mode to
management modes from other village banks, applied
the payment system as identity of the participants.
them to improve village banks' management models
There were two mainly indirect modes. One was that
and explored suitable models for their own operations.
the original bank played the role of the agent one, the
Although the "Bank+Enterprise+Cooperative" mode,
other was that commercial banks provided agency
loan pattern and the network system didn't apply
services.
practically, village banks could seek the sustainable
Bayan Rongxing Village Bank actively coordinates
development in the process of reform and make
with local People's Bank of China, smoothing the
progresses in the sustainable development. The village
way to join the micro payment system, thus seek
banks' goals were to support the development of the
to coordinate with People's Bank of China. The
rural economy and only standard bank could bring
interconnection will fail, if Bayan Rongxing Village
benefits to farmers and promote the improvement of
Bank is unable to join the system. Although most
new socialist countryside. http: //publish.neau.edu.cn
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Journal of Northeast Agricultural University (English Edition)
Vol. 22 No. 4 2015
Henan.
References Chen Y X, 2012. Research on the development of village banks. Southwestern University of Finance and Economics, Sichuan. Hu G Y. 2013. Innovative financial products and services of village
Qu X G, Luo J C, 2013. The factors and countermeasures of village banks in China. Journal of South China Agricultural University (Social Science), 3: 112-120. Sun L. 2012. Research on village banks' sustainable development in
banks to support small and micro enterprises' development-based on
Heilongjiang Province. Northeast Agricultural University, Harbin.
Ningjiang Huimin Village Bank in Jilin Province. Journal of Jilin
Tian L Y. 2012. The factors and countermeasures of village banks in
Financial Research, 2: 48-52. Ji N W, Chen Y Z, Xiong C. 2012. Explore village banks' operating modes. Chinese Market, 22: 73-74+77. Jia R. 2013. Construction of village banks operating performance indicators system, Guide to Business, 19: 29-31. Liao J W, 2010. Trend and development in the direction of village banks' management behavior - based on empirical village banks in Sichuan. Modern Economic Research, 12: 38-41. Li X C, Cui S Q. 2010. The reasons and countermeasures of the slow progress in the construction of village banks in China. Economic Aspect, 3: 82-86. Lv S S, 2010. The village banks' business models and performance researches in China. Henan University of Science and Technology,
E-mail: [email protected]
the process of development. Northeast University of Finance and Economics, Liaoning. Wang F X, Xin L Q. 2011. Village banks' development in Heilongjiang Province. The Financial Theory and Teaching, 6: 65-66. Wu Z X. 2013. Research on development of village banks. Shandong University, Shandong. Zhang R. 2014. Problems and countermeasures in financial products of China's village banks. Business Manager, 8: 24. Zhang S F. 2010. Countermeasures of developing village banks in China. Commercial Modernization, 15: 147-148. Zhao Y R, Wang H B, 2012. Village banks' operation modes in Shandong Province. Journal of Shandong Agriculture University (Social Science), 1: 41-45+63.
ScienceDirect
Vol. 22 No. 4 75-82
Journal of Northeast Agricultural University (English Edition)
Available online at www.sciencedirect.com
Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank in Heilongjiang Province Wang Shuang1, Wang Ji-heng1*, Liu Bing2, and Yu Xiao-wen1 1
College of Economics and Management, Northeast Agricultural University, Harbin 150030, China
2
College of Applied Foreign Languages, Heilongjiang University, Harbin 150080, China
Abstract: This paper summarized the management models of village banks in China. We compared and analyzed different management models of four village banks in different regions on four aspects: regional agriculture feature, loan for farmers, loan for enterprises and the construction of network, then came to the conclusion that, if the village banks' health development can realize, they must pay attention to innovating in loan patterns as well as material loan and starting out the network development. Key words: village bank, management model, premier choice CLC number: F830
Document code: A
Article ID: 1006-8104(2015)-04-0075-08
BBC and super efficiency model, and Jia (2013)
Introduction
constructed the evaluation index system of village
In recent years, village banks have been developing
their operation efficiency. Thirdly, Hu (2013) and
rapidly as a new type of rural financial institution.
Zhang (2014) focused on the financial products and
Business model analysis plays an important role in the
service modes, which provided suggestions for the
development of village banks. Through management
development of rural economy.
model analysis, village banks realized the problems
On the other hand, demerits of researches on the
existing in the process of development, promoted
development of village banks still exist. Firstly, the
village banks' innovation in the area of management
foreign scholars mainly focused on the management
modes and helped village banks play a competitive
models of village banks in developed countries, the
role in agriculture. The domestic scholars' researches
effective management models didn't apply to China's
on the village banks mainly focus on the following
village banks. Secondly, the existing literatures focused
aspects. Firstly, Qu (2013) proposed to solve the
on the solutions and suggestions, which couldn't reflect
problems of village banks, such as low awareness, but
the problems of village banks. This paper took Bayan
they had difficulties in raising capital and shortage
Rongxing Village Bank as the object, summarized
of professionals. Secondly, researchers took the
the management models of village banks in China.
mathematics methods to study the operation efficiency
We chose four village banks' management models in
of village banks, for instance, Wu (2013) used CCR,
different areas. We compared and analyzed from the
banks based on the perspective of AHP to evaluate
Received 1 May 2015 Supported by the Philosophy and Social Science Project in Heilongjiang Province (14B074) Wang Shuang (1991-), female, Master, engaged in the research of rural finance. E-mail: [email protected] * Corresponding author: Wang Ji-heng, professor, supervisor of Ph. D student, engaged in the research of rural finance. E-mail: [email protected] http: //publish.neau.edu.cn
·76·
Vol. 22 No. 4 2015
Journal of Northeast Agricultural University (English Edition)
characteristics of agriculture, loans to farmers, loans to
rapidly. Secondly, village banks have weaknesses.
enterprises and the constitution of network, in order to
Village banks mainly focus on the groups of individual
promote the rural economy.
households, small and medium-sized enterprises and low-income people. According to customers' features,
Connotation and Characteristics of Sustainable Development Management Model of Village Bank
village banks will provide different kinds of services to
Connotation of sustainable development
process. Thirdly, village banks' funds are confined in
management mode of village bank
rural areas. The differences between village banks and
The sustainable development of village banks is in
commercial banks are that village banks take deposits,
the process of pursuing self survival and sustainable
which will be invested in the area they serve. It is a
development. We should develop and make full use
good way to serve for local economic development
of resources. It is not only necessary to consider the
and prevent the outflow of funds. Nevertheless, the
goals of village banks and their market positions,
commercial banks take resident deposits and invest
but also to maintain the profit growth in the field of
in the developed areas, to some extent, ignoring the
competition existing and future expansion of business
development of rural economy.
meet demands of their customers and make full use of the advantages of information, effectively avoiding the problem of inappropriate information in the financing
environment. In general, the management models of village banks are the same as that of the commercial banks. However, according to different situations of each region, the management models of village banks are different.
Categories of Current Sustainable Development Management Model of Village Banks Village banks are founded in different areas, thus
Characteristics of sustainable development
management models are different. We mainly
management mode of village bank
summarized three typical management models, taking
Firstly, village banks have small scale of operation
Sichuan Yilong Huimin Village Bank, Jilin Zhenlai
and simple form of organizations. Village banks are
Guokai Village Bank and Dazu HSBC Village Bank
founded in rural areas, therefore, village banks serve
for examples, then provided some references for
for farmers in rural areas, where there are fewer
village banks (Ji et al., 2012; Lv, 2010; Liao, 2010)
branches, thus business decisions can be made more
(Table 1).
Table 1 Categories of current sustainable development management model of village banks Category
Bank+Fund cooperative
Representative bank Sichuan Yilong Huimin Village Bank
Farmer+Enterprise+Bank+Government Jilin Zhenlai Guokai Village Bank
Dazu HSBC Village Bank
Typical mode
Cooperation mode
Operation mode
Through participation in farmers cooperative fund, this village bank provided technical support and let retail business operate in bulk
With a well-deserved reputation, government guided farmers to participate in agricultural projects and this village bank provided financial services for enterprises
Dazu HSBC Village Bank loaned to farmers and enterprises through it relies on long term cooperation
Advantage
1. Expanded farmers cooperative fund and improved benefited range 2. Reduced village banks' operating costs and improved their work efficiency
1. Fund cycle inter-system is able to prevent from credit risk and increase security of village banks 2. Mode solved problems and improved visibility of village banks
1. By using originator's ability to achieve its own development 2. Having flexible repayment methods to loan mature
E-mail: [email protected]
Quaternity mode
Company+Household Supply chain mode of loan
Wang shuang et al. Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank
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Table 2 reflected Yilong Huimin Village Bank's
can reduce the risk of Yilong Huimin Village Bank
deposit and loan data in 2007-2011. The profit of
and improve its efficiency as well, make convenient
Yilong Huimin Village Bank had been increasing
for farmers in daily life and provide funds. As a new
rapidly since 2007. The achievement was bounded
type of rural financial institution, Yilong Huimin
by its effective management model. This "Bank+
Village Bank would pour more fresh blood to local
Fund Cooperatives" mode of cooperation has served
economic development and play a positive role in rural
thousands of farmers as its clients, to some extent, it
economy.
Table 2 Deposit and loan data in 2007-2011 (Units: ten thousand RMB) Year 2007
Total asset 1 500
Balance of deposit
Balance of loan
Profit
394.1
144
–20
2008
7 700
4 702
2 869
31
2009
22 800
19 795
11 595
346
2010
47 000
24 832
18 831
1 352
2011
11 500
102 500
49 000
3 836
Data sources: Sichuan Financial Network.
development is unbalanced and the North-South gap
Comparison of Four Village Banks' Management Models
continues widening in China. We took Bayan Rong-
Village bank is a new rural financial institution which
Village Bank for examples and compared their
is responsible for its own profit and loss. It aims to
economic situations, then proceeded to summarize
serve the agriculture, rural areas and farmers. There are
the advantages and disadvantages of Bayan Rongxing
distinctions in management models because economic
Village Bank (Table 3).
xing Village Bank, Sichuan Yilong Huimin Village Bank, Baoshang Village Bank and Shanxi Ansai
Table 3 Comparison of four village banks' management models
Comparative bank
Bayan Rongxing Village Bank
Sichuan Yilong Huimin Village Bank
Baoshang Village Bank
Ansai Village Bank
Agricultural characteristic
Rice, soybean, corn, commodity grain, pig
Wheat, rape, soybean, commodity base
Intensive livestock industry
Wheat, bean, pig, cattle, sheep
Loan to farmer
Five or three families joint guaranteek government and bank cooperation
Provide money for the fund cooperatives, government and bank cooperation
Provide pasture management, cooperative economic organization loan to farmers
Concentrate in industries within region of loan; government and bank cooperate
Composite mode
Tala micro loan system
Support funds to regional industry chain
Loan to enterprise
Traditional mode
Network construction
No
No
Yes
No
Agency business
Act Harbin Bank's financial products
No
No
No
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Journal of Northeast Agricultural University (English Edition)
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Bayan Rongxing Village Bank was founded
the two batches of leaflets and so on. Thirdly,
by Harbin Bank in Heilongjiang Province, which
Bayan Rongxing Village Bank tried to seek develop-
expanded its business actively and started agricultural
ment in different ways, but one that could not be
loans in 61 administrative villages, 12 towns and 121
ignored was carrying out the agency business. Bayan
natural villages. It provided agricultural loans about
Rongxing Village Bank sold the financial products
830 000 000 RMB and benefited 31 000 households.
of Harbin Bank and Industrial Bank, which not only
The amount of loan to five small and micro enterprises
diversified the type of service, accelerated the speed
reached 4 850 000 RMB. The village banks supported
of development, but also benefited to clients and let
229 individual business, the loans reached 40 930 000
them join into the financial boom. Drawbacks were
RMB. Bayan Rongxing Village bank paid more and
as follows. Firstly, Bayan Rongxing Village Bank
more attention to expend kinds of loans as well as
was lacking of collateral (Li, 2010; Tian, 2012). It
house mortgages, which included loans to women
mainly implemented the five-household and three-
for their running business, re-employment of laid-off
household joint guaranty and sold fewer. Unlike other
business loans, put salaries up for collateral and so
three village banks' management modes, Baoshang
on. As the credit for village banks' excellent business,
Village Bank had the pasture management authority
at the second Chinese Micro Finance Institutions
as collateral (Wang, 2011). Although Heilongjiang
Association Annual Meeting in 2012, it was awarded
Province has implemented the mortgage of land
the "most social responsibility award".
management right and land use right in individual
By comparing with other village banks, the
pilot areas, it hadn't been implemented in larger areas
advantages of Bayan Rongxing Village Bank were
yet, to some extent, it had restricted the farmers' and
reflected in the following aspects. Firstly, Bayan
enterprises' demands. Secondly, Bayan Rongxing
Rongxing Village Bank focused on agricultural
Village Bank's website construction wasn't satisfied.
loans. The loans aimed at individual farmers and the
Among the four village banks, only Baoshang Village
proportion of agricultural loan reached 90%, differing
Bank had built website, making it convenient for
from other three village banks. As Bayan Rongxing
customers to understand its information. That was
Village Bank had more individual investors and fewer
where Bayan Rongxing Village Bank should learn
medium-sized enterprises, it should seize the key to
from Baoshang Village Bank. While paying attention
practice the effective method and increase lending
to the market, Bayan Rongxing Village Bank should
efforts. In accordance with the door-to-door viewing
not ignore the construction of website for it was an
time, loan object, speech and deportment occasions
important channel for customers to understand the
to reduce Bayan Rongxing Village Bank's non-
village bank.
performing loan ratio. Secondly, Bayan Rongxing Village Bank focused on the market. Market played a very important role for this bank. Bayan Rongxing Village Bank used a variety of means to serve clients. Credit clerks did interviews, by which they
Premier Choice of Bayan Rongxing Village Bank Sustainable Management Model
understood the basic situation of household loans
Comparing with other three banks, Bayan Rongxing
and visited important customers regularly, appointed
Village Bank lacked scientific cooperation mode,
an expert management to collect information of clients
as well as website construction. In view of the
and enhanced communication. Bayan Rongxing
existing problems, we put forward some reasonable
Village Bank also broadcasted TV advertisements,
suggestions to promote Bayan Rongxing Village
hanged the lamp-post advertising and handed out
Banks' development (Table 3).
E-mail: [email protected]
Wang shuang et al. Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank
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become the "accessory" and miss the opportunity to Financial environment construction
develop freely and subject to government instructions.
During the investigation, we found that the govern-
In this aspect, Bayan Rongxing Village Bank should
ment supported Bayan Rongxing Village Bank's
do the preparatory work before the government takes
development, but there were no specific clauses
shares, the government should strictly control the
to guide it, and the government made few efforts
proportion of shares and make it play its own role in
to support it, there were few fiscal deposits in
the development (Sun, 2012).
Bayan Rongxing Village Bank and most of them were deposited in commercial banks. What's more,
Carrying out "Bank+Enterprise+Cooperative"
although Bayan Rongxing Village Bank was weaken
model
in absorbing funds, the tax amount was very huge
Bayan County had the title of "the NO.1 pig-breeding
and it brought great pressure to the development of
country", the output quantity was very considerable
Bayan Rongxing Village Bank that it paid 13% deposit
and it focused on meat processing. There were five
reserve (45 000 000 RMB). At the same time, the
large food groups in total. Shuanghui and Yurun Group
local Banking Regulatory Bureau was also intensive.
pig breeding, slaughtering and processing settled in
Bayan Rongxing Village Bank had to survive under
2012. Although Bayan Rongxing Village Bank has
the pressure of the government, the People's Bank of
limited money to large enterprises, the maximum loan
China and Banking Regulatory Bureau.
amount can't exceed 10% of the registered capital
To construct a good financial environment, firstly
(5 000 000 RMB), it should seize the opportunity to
Bayan Rongxing Village Bank should pay attention
develop, create mutual win-win cooperation mode
to implementing environmental construction, with a
as an innovation with five new cooperatives. Bayan
good governance structure and incentive mechanism.
Rongxing Village Bank can refer to Sichuan Yilong
Uncertain and imperfect factors still exist in rural
Huimin Village Bank's management model and find an
area, the government's policy support and financial
effective road to develop.
regulatory measures played a "wind vane" role in the
The government plays an important role, whose
development of Bayan Rongxing Village Bank, which
responsibility is to form an actively cooperation
will make it develop quickly (Zhang, 2010). Bayan
between Bayan Rongxing Village Bank and enter-
Rongxing Village Bank should maintain a good long-
prises. The Third Plenary Session of 18 pointed out
term cooperative relationship with the government.
to encourage rural cooperative economy, the govern-
The government can become a shareholder of this
ment may actively encourage farmers to cooperate
village bank to support and pay tax ratio deposit to
with others in the unit of villages. Bayan Xingtai
it. This process not only suppresses the situation that
and Fengyuan Farmers Specialized Cooperatives
commercial banks with funds, but do not develop
Association were established by four pig farming
business in rural area, while village banks extend
cooperatives. On the other hand, Bayan Longyu
agricultural business but suffer from the status that
Planting Professional Cooperatives brought abundant
they have no money. Take the government's reputation
raw material resources to the local meat processing
as a brand, change the public idea that Bayan
enterprises. The enterprises and cooperatives not only
Rongxing Village Bank is a personal bank. It is a good
adjust pigs' price, but also guarantee the stability of
approach for Bayan Rongxing Village Bank to deposit
the supply of enterprises. In order to solve the problem
and vigorously devote great efforts to loan business.
that Bayan Rongxing Village Bank loans to large
But if the government becomes a shareholder in Bayan
enterprises unactively, it should carry out the loan
Rongxing Village Bank, to a certain extent, it will
business actively, for the part that it couldn't meet http: //publish.neau.edu.cn
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Journal of Northeast Agricultural University (English Edition)
Vol. 22 No. 4 2015
customers' demands, it should turn to its original bank
explain the transaction processes, provide mortgage
for help, then it played the agent's duty (Table 3).
registration and handle disputes, at the same time, Bayan Rongxing Village Bank can make use of this
Carrying out "separation of mortgage" model
platform for integration resources, establish agri-
The Third Plenary Session of 18 had brought an
cultural loan mortgage service stations and solve the
opportunity to develop rural finance. The "Decision"
problems of agricultural loans while reducing the
that the Central Committee of the Communist Party
business risk and the rate of bad loans.
of China had deepen the reform of some major issues that ensured farmers' homestead usufructuary
Focusing on network construction
rights, reformed the rural system, chose some pilots,
The village banks' websites can reflect the multiple
carefully and steadily pushed forward the housing
plates about them, for example, dynamic information,
property rights, guaranteed farmers' rights. It would
organization frame, management status, financial
help to alleviate problems, explore the channels for
products etc., as well as increasing clients' awarenesses
peasants to increase property income and promote
of credit product, making it convenient for clients
the development of personal financial service in rural
to download the loan application. Therefore, Bayan
areas.
Rongxing Village Bank should absorb the advantages
Agricultural loans almost took 90% of the total loan
of Baoshang Village Bank, actively carry out the
in Bayan Rongxing Village Bank's loans accounted.
construction of website (Table 3). Considering the
In addition to reduce the proportion issued to agricul-
present situation, Bayan Rongxing Village Bank
tural loans of Agricultural Bank gradually, the lending
and Xinglong branch need to improve the hardware
rate of Bayang Rongxing Village Bank was lower
equipment. System development and maintenance
than other banks. If Bayan Rongxing Village Bank
need to be conducted under the guidance of the
intends to improve the present situation and has
original bank in order to enhance the visibility
difficulties in financing, the innovation of collateral
of Bayan Rongxing Village Bank. The website
would be a good way, instead of relying on credit
construction of Bayan Rongxing Village Bank is
loan. Heilongjiang Province has vast territory and
important, which provides the platform and security
abundant resources, Bayan County is the center of
for the development of network payment system. The
corn and soybean planting, Bayan Rongxing Village
website construction can not only make convenience
Bank should follow the policy of the Third Plenary
for the business process, but also for customers.
Session of 18 and take this opportunity to innovate
Therefore, Bayan Rongxing Village Bank should
loan mode which based on the original loan mode
keep up with the pace of other village banks. Bayan
(Table 3). It should formulate farmers' land scientifi-
Rongxing Village Bank shouldn't ignore the network
cally, ensure that Bayan Rongxing Village Bank
construction while there's less business. Strengthening
provide this service to clients in time and make steps
the construction of website can give information to
to carry out the "three rights". The government should
clients and promote Bayan Rongxing Village Bank's
carry out the "three rights" certificates, clear the right
development.
of contracted management of rural land, forest right and rural residents housing property, which can
Joining payment and settlement system
not only define ownership and ease the right of
In recent years, the network provides convenience to
management, but also promote the reform of rural
the residents. The development of China's financial
financial system. The government should establish
industry comes along with the support of network.
a property of trading platform right in the village,
Most banks joined the unionpay system and debit
E-mail: [email protected]
Wang shuang et al. Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank
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card which influenced residents' life deeply. But for
village banks are using the first mode, there is a
village banks, the bank card business is very difficult
problem that original bank is loath to be an agent for
that people can only take passbook to apply for a
occupying the parent bank capital. At the present,
bank card. "The People's Bank of China, the China
Bayan Rongxing Village Bank should improve the
Banking Regulatory Commission about village
hardware equipment, the recruitment of technical
banks, loan companies, rural mutual cooperatives,
personnel, determine the credit risk prevention, then
loan company related policy" made provision for
it must coordinate with the original bank to take part
payment and settlement management. The four types
in its pay system and pay amount of agency fees. If
of institutions had the conditions to be added to RMB
Bayan Rongxing Village Bank has the ability to join
bank settlement account management system and
payment system and develop the system, it will open
network check of citizen identity information system
bank card application by itself. Bayan Rongxing
in accordance with the relevant provisions of the
Village Bank should not avoid reform because of its
People's Bank of China. In line with the conditions of
small size and weak technical conditions. It doesn't
village banks, they can join the large amount payment
have the basic functions if Bayan Rongxing Village
system, in accordance with the relevant provisions of
Bank has no Alipay, online payment, POS machine
People's Bank of China's micro payment system and
and ATM machine. Only with scientific and rational
the image exchange system, but the document didn't
reforms can Bayan Rongxing Village Bank make
point out that in which conditions village banks could
contributions to the local economy and achieve better
be consistent to join the large amount payment system.
development.
What's more, village banks could't print notes, issue bank cards or exchange between banks directly. To some extent, all these would make the village banks
Conclusions
lose the most basic functions. At present, Bayan
By summing up the sustainable development
Rongxing Village Bank still adopts the traditional
management models of village banks in different
way for the residents to deposit service, thus it doesn't
regions in China, taking examples of Bayan Rongxing
charge fees. This approach not only limits Bayan
Village Bank in Heilongjiang Province, Sichuan
Rongxing Village Bank's deposit and quantity of loan
Yilong Huimin Village Bank, Baoshang Village
business, but also makes inhabitants inconvenient.
Bank and Ansai Village Bank, we pointed out that
Now problems of small scale, weak technical force and
innovation was important in the operation mode
risk control abilities etc. still exist in Bayan Rongxing
of village banks. Village banks brought successful
Village Bank. Village banks have no direct mode to
management modes from other village banks, applied
the payment system as identity of the participants.
them to improve village banks' management models
There were two mainly indirect modes. One was that
and explored suitable models for their own operations.
the original bank played the role of the agent one, the
Although the "Bank+Enterprise+Cooperative" mode,
other was that commercial banks provided agency
loan pattern and the network system didn't apply
services.
practically, village banks could seek the sustainable
Bayan Rongxing Village Bank actively coordinates
development in the process of reform and make
with local People's Bank of China, smoothing the
progresses in the sustainable development. The village
way to join the micro payment system, thus seek
banks' goals were to support the development of the
to coordinate with People's Bank of China. The
rural economy and only standard bank could bring
interconnection will fail, if Bayan Rongxing Village
benefits to farmers and promote the improvement of
Bank is unable to join the system. Although most
new socialist countryside. http: //publish.neau.edu.cn
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Journal of Northeast Agricultural University (English Edition)
Vol. 22 No. 4 2015
Henan.
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