Two misunderstandings of Internet Finance in Rural areas

Whether it is accepted or not, Internet finance, a new wave produced under the background of information economy, financial repression and interest rate marketization, is rapidly changing the face of China's financial industry.

At present, Internet finance has made a great contribution to promoting inclusive financial development, increasing the financing coverage of small and micro enterprises, lowering the threshold of investment and financial management, and stimulating endless imagination. When the development of Internet finance becomes more and more stable, the whole industry is looking for the next explosive growth point.

We believe that the next blue sea of Internet finance will appear in rural areas. China's rural areas have a large population and a vast market, and at the same time, they are also "semi-wasteland" covered by finance. There is a strong demand for funds, but there is a shortage of supply; there is a strong desire for development, but there is a "hollowing out" of the economy. As the blood vessel of the real economy, the blood supply of finance to rural areas is obviously insufficient, and the level of service needs to be improved. The penetration of Internet finance in rural areas will help to improve this problem.

In recent years, the rural economy is embarking on the road of "e-commerce" and "informationization". When the proportion of e-commerce reaches a certain extent, Internet finance can accurately position itself in this ocean through deep integration with the new economic form. to promote cross-era changes in China's rural areas!

[the core points of the report are as follows]

Two misunderstandings.

First, rural finance is not poverty alleviation finance or charity finance. Financial institutions cannot be required to blindly support rural finance regardless of their own profits. Poverty alleviation finance and charitable finance can be used as a useful supplement to rural finance, but they are by no means the whole of rural finance. In order to achieve long-term vitality, rural finance must adhere to commercial sustainability, return to the nature of commerce, and allow relevant financial institutions to raise lending rates above the break-even point. According to a study by the World Bank, "whether in Latin America or Asia, the average annual return on investment of farmers and microenterprises can reach 117% 847%. There are also numerous cases in China that show that farmers and micro-enterprises with scarce capital, once funded, can create a much higher marginal return on investment than large urban enterprises. "

Second, rural finance is not entirely agricultural finance, but covers the "three rural finance" of rural areas, agriculture and farmers. In the same study, the World Bank pointed out that it is necessary to avoid replacing broader rural finance with "narrow agricultural credit." A good financial system should promote rural development and improve the welfare of farmers. Compared with traditional finance, Internet finance puts more emphasis on the concept of ecosystem, which can better provide services to rural areas, agriculture and farmers as a whole, thus giving full play to the synergy of financial services. we will promote the great-leap-forward development of the new economy in rural areas.

As an advanced form of economy, the core function of finance is resource allocation. The biggest bottleneck of China's rural finance lies in the distortion of resource allocation and inefficiency. Scarce financial resources are occupied by "agricultural giants", "leading enterprises" and other economic units that are not short of money. This system, which is supposed to be "timely help", has become the icing on the cake. Due to the existence of layer-by-layer reporting and level-by-level examination and approval, the timeliness of government funds for supporting agriculture has been greatly reduced, and financial activities have become "slow cattle towing fast cars". Internet finance will embed financial services into all aspects of the rural economy through its grassroots, fast and other multiple advantages, alleviate resource mismatch and improve allocation efficiency.

(2) the proportion of cash in China's rural economic activities is high, which leads to low payment efficiency and high degree of economic irregularization. In recent years, traditional finance has actively innovated and developed products such as "remittance by address", "Huinong card", "card-free withdrawal" and mobile banking. However, these products still have some problems such as dependence on physical outlets and poor user experience. New paradigms of Internet finance, such as online payment and mobile payment, have embedded rich scenarios into the payment field, and achieved remarkable results. When these applications are really combined with rural scenarios, they will produce the effect of "1x 1 > 2".

(3) from the experience and research, the core problem of rural finance still lies in credit. For farmers, this problem is more reflected in the availability and price of loans. For financial institutions, it is the risk and return of loans. Under the background of economic hollowing out in rural areas, low education level of farmers, lack of financial information and lack of collateral, the imbalance between supply and demand of funds will exist for a long time. Internet finance relies on big data and cloud computing and other technologies, the introduction of unstructured data mining potential demand, accurate allocation of resources to improve the effectiveness of post-loan management. At the same time, high-speed loans and flexible deadlines have also effectively reduced the financial costs of farmers.

(4) China's rural population is large and sparsely populated, the construction cost of physical network is high, and the coverage of the population is limited. After much research, the cost of a standard physical network is usually close to 2 million yuan / year. Internet finance uses the advantages of technology to cover the same population at a much lower cost. Especially when the mobile phone is no longer just a communication tool but a national infrastructure, but an "extension" of users, the marginal cost of Internet finance covering rural areas will approach zero!

Every farmer is an entrepreneur. " For the majority of farmers who have a history of thousands of years of independent management, this sentence is not an exaggeration. Chinese farmers have the strongest vitality and creativity. Reform and opening up is from the "household contract responsibility system," the spark, and finally formed a prairie fire. After the e-commerce economy swept the cities of the whole country, with the rise of new farmers (see figure 3), the rural economy is going through the process of "e-commerce". The high-frequency, small and fast characteristics of e-commerce are highly consistent with the traditional one-family business model in rural China. When the "e-commerce" reaches a certain extent, Internet finance can use the data deposited by the e-commerce platform to embed the rural new economy and promote the development of the new economy.

Another core issue of the credit problem is the loan repayment rate and the bad debt rate. Over the years, "blood transfusion" credit has failed to effectively improve the repayment ability of rural areas, which is the important reason for the high default rate of joint guarantee loans in traditional financial micro-farmers' loans. When Internet finance is combined with e-commerce, a new paradigm of "hematopoiesis" finance has emerged, which can effectively solve the problem of insufficient repayment ability, reduce the risk of default and improve the financial environment under the new rural economic environment.