How to innovate the Rural Financial system Agricultural Insurance can not make a Great Leap forward

In order to achieve the grand goal of agricultural modernization, an efficient new rural financial system is indispensable. The central government supports the development of new rural cooperative financial organizations and proposes to cultivate and develop rural cooperative finance and constantly enrich the types of financial institutions in rural areas on the basis of democratic, standardized and dynamic farmers' cooperatives and supply and marketing cooperatives; it is proposed to adhere to the principles of membership system and closeness, and promote the development of community-based rural financial mutual aid organizations on the premise of not absorbing, saving, lending or paying fixed returns.

The central government has also called for increasing support for agricultural insurance, requiring the central and provincial governments to increase the proportion of premium subsidies for major grain crop insurance, and gradually reducing or abolishing premium subsidies at the county level in major grain-producing counties. insurance institutions are encouraged to carry out insurance for agricultural products with distinctive advantages, and where conditions permit, premium subsidies can be provided by the central government, and the central finance will support them by means of awards instead of subsidies.

Rural finance is an old and difficult problem, how to innovate the rural financial system has been difficult to carry out. To implement the central government's policy on rural financial system innovation, it is necessary to deeply understand the current environment of small-scale peasant economy, adjust measures to local conditions, seek truth and pragmatism, and do practical and good deeds for rural areas and farmers.

I. Establishment of community-based mutual fund organizations in rural areas

The outflow of people and property out of rural areas has existed for a long time, so there is a theory of blood loss in rural areas. In the channels of rural blood loss, financial institutions are an important aspect. Every year, financial institutions across the country transfer the vast majority of farmers' deposits to cities. Some people believe that this is an important reason for the current widespread poverty in rural areas, resulting in long-term accumulation of the problems of agriculture, rural areas and farmers.

At present, there does exist the problem of farmers' low-interest deposits, but only high-interest loans or even high-interest loans, but only high-interest private loans. There is a huge financial demand in rural areas, but there is a lack of formal financial institutions to provide financial services for farmers.

One of the key reasons why formal financial institutions are unwilling to provide financial services for farmers is that farmers' financial needs are extremely scattered and complex, and farmers lack appropriate financing mortgage guarantees, so that when formal financial institutions serve farmers, the cost is extremely high. it's risky.

Compared with formal financial institutions, rural private lending is very active, and the annual interest rate can reach 20% or more. Rural private lending is prone to problems, first, the lending interest rate is too high, and second, when it is difficult for farmers to repay, the lender may do whatever it takes to force farmers to repay, resulting in vicious events.

If community-based rural financial mutual aid organizations are developed to provide financing services for farmers who need loans, because of the symmetry of information between community finance and farmers, the moral hazard of farmers failing to repay loans is very small. and community finance can supervise borrowers at a low cost, on the one hand, it can alleviate the problem of farmers' loans, on the other hand, it can obtain interest income for community finance.

How to develop rural community finance? The rural built-in finance established by Li Changping in some villages of Hubei, Hebei and Henan is quite reasonable. Take the "Xiyang Red Pension Fund Mutual Assistance Cooperative" set up by him in Haotang Village, Xinyang, Henan Province as an example. The elderly in the village raise funds to set up financial cooperatives, and they only borrow from the villagers, with a share of interest income at the end of the year. The villagers borrow money from the cooperative, and each loan needs to be guaranteed by five members of the cooperative. So far, the cooperative has not had a bad loan for more than four years. On the one hand, Li Changping's built-in finance meets the capital needs of rural areas, on the other hand, it provides interest income for the elderly in rural areas. If the state can inject funds into the "mutual aid cooperatives of pension funds" set up spontaneously by all farmers and supervise them at the same time, it may form a new good way to build rural resources to the countryside in the whole country.

Farmers have financial needs, but most of them are not and can not be used for operational undertakings, such as starting up factories, building pig farms, developing characteristic agriculture and so on. At present, the financial needs of farmers are mainly living rather than productive. Even productive financial demand is generally only cyclical input and working capital of the means of production. If farmers borrow money to set up factories and develop characteristic agriculture, when there is a high risk in agriculture and there is already a surplus of agricultural products market, once it fails, the consequences will not only be serious to farmers, but also a severe test to community finance. Therefore, rural community finance mainly deals with the financial needs of farmers' vitality, and at most it is a kind of productive demand for periodic funds, rather than covetousness and management.

At present, most of China's rural areas are not suitable for entrepreneurship, and the important function of agriculture itself is to guarantee, maintain, not develop, let alone become rich. Farmers are expected to develop agricultural production through loans, improve agricultural production efficiency and get rich. Under the current situation of overall surplus production capacity of agricultural products in China, greater agricultural production capacity is created by more financial input. For agriculture with little elasticity of demand, the result must be "increasing production without increasing income", and may even bring serious consequences of increasing production, reducing income and going bankrupt.

II. Agricultural Insurance cannot make a Great Leap forward

Agricultural insurance also has the problem of how to connect the formal insurance institutions with the scattered and complex needs of small farmers. The state provides policy insurance for agriculture. Farmers only pay a premium of 3 yuan and a financial subsidy of 12 yuan. If the grain harvest fails or is affected, they can get disaster compensation of up to 300 yuan per mu. 3 yuan is very little, and 300 yuan is a lot of compensation, not to mention the fact that agricultural disasters are very common, and farmers should have welcomed agricultural insurance. However, small-scale peasant economy, each household has only about 10 mu of arable land, family responsibility, intensive farming, can be quite flexible to deal with various situations in agricultural production, therefore, in general, small-scale peasant agriculture can effectively prevent disasters, so farmers lack interest in agricultural insurance.

Another important reason why farmers do not have the enthusiasm to participate in agricultural insurance is that it is more difficult for farmers to obtain insurance compensation and have to seek compensation from insurance companies many times, and the manpower cost has long exceeded the available insurance compensation. The difficulty of insurance companies is that they must verify the losses reported by farmers and prevent their moral hazard. How to assess the losses suffered by farmers, and even how to match the fields insured by farmers with those affected by disasters is a matter of great effort. In short, the cost of docking between formal insurance companies and small-scale farmers is extremely high, which makes it almost impossible to implement agricultural insurance under the condition of small-scale peasant economy.

Compared with the strong disaster prevention ability of small farmers, capital agriculture engages in large-scale operation, employs agricultural labor force, and has serious lack of flexibility to cope with agricultural production, and any change in natural conditions may lead to a serious reduction in production. At the same time, the scale of capital agriculture is relatively large, the bookkeeping is relatively standardized, and the docking ability with insurance companies is relatively strong, so capital agriculture has a high demand for agricultural insurance.

In 2010, the author went to Fanchang, Anhui Province to investigate about 10 large households who rent more than 600 mu of land. These large households have been growing for three years and six seasons. Oddly enough, almost all of them have six seasons of agricultural production, every season is not affected. Thanks to agricultural insurance, insurance companies pay premiums of as little as NT $100 to as much as NT $300 per quarter for each large family, so that they can still barely survive.

Why are large households more vulnerable to natural disasters, resulting in reduced agricultural production? There are three reasons: first, for large households that reach a certain production scale, their flexibility in agricultural production is greatly reduced, and it is "difficult for ships to make a U-turn" in dealing with market and natural risks; second, one of the characteristics of wage labor is that they work on time, which is far less flexible than family agriculture. Third, capital agriculture generally tends to use machinery instead of labor, which not only increases the purchase cost of machinery, but also because machinery is not as flexible as manual, so that agricultural production shows a state of extensive management.

At present, there is a stronger and stronger call for the development of agricultural insurance, which is directly related to the capital going to the countryside and the local government promoting the large-scale operation of rural land circulation in recent years. Chinese traditional small farmers not only have a strong ability to deal with natural disasters, but also lack the ability to dock with formal agricultural insurance, so they are not interested in policy insurance, let alone commercial insurance. The demand for policy insurance is capital agriculture and large-scale operation.

We generally believe that the state pays for policy-oriented agricultural insurance to serve farmers, but in fact, the benefits of agricultural insurance are only earned by capital agriculture, and capital agriculture is far inferior to small farmers in agricultural output. If China's 2.1 billion mu of arable land is managed on a large scale by capital, then only agricultural insurance, the state may have to provide hundreds of billions of subsidies every year. Therefore, capital agriculture, scale operation and agricultural insurance should not be popularized on a large scale.