Analysis on Sustainable Development Management Model of Village Banks — Based on Bayan Rongxing Village Bank in Heilongjiang Province

Wang Shuang， Wang Ji-heng*， Liu Bing， and Yu Xiao-wen

1College of Economics and Management， Northeast Agricultural University， Harbin 150030， China

2College of Applied Foreign Languages， Heilongjiang University， Harbin 150080， China

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

1College of Economics and Management， Northeast Agricultural University， Harbin 150030， China

2College of Applied Foreign Languages， Heilongjiang University， Harbin 150080， China

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.

village bank， management model， premier choice

Introduction

In recent years， village banks have been developing rapidly as a new type of rural financial institution. Business model analysis plays an important role in the development of village banks. Through management model analysis， village banks realized the problems existing in the process of development， promoted village banks' innovation in the area of management modes and helped village banks play a competitive role in agriculture. The domestic scholars' researches on the village banks mainly focus on the following aspects. Firstly， Qu （2013） proposed to solve the problems of village banks， such as low awareness， but they had difficulties in raising capital and shortage of professionals. Secondly， researchers took the mathematics methods to study the operation efficiency of village banks， for instance， Wu （2013） used CCR， BBC and super efficiency model， and Jia （2013）constructed the evaluation index system of village banks based on the perspective of AHP to evaluate their operation efficiency. Thirdly， Hu （2013） and Zhang （2014） focused on the financial products and service modes， which provided suggestions for the development of rural economy.

On the other hand， demerits of researches on the development of village banks still exist. Firstly， the foreign scholars mainly focused on the management models of village banks in developed countries， the effective management models didn't apply to China's village banks. Secondly， the existing literatures focused on the solutions and suggestions， which couldn't reflect the problems of village banks. This paper took Bayan Rongxing Village Bank as the object， summarized the management models of village banks in China. We chose four village banks' management models in different areas. We compared and analyzed from thecharacteristics of agriculture， loans to farmers， loans to enterprises and the constitution of network， in order to promote the rural economy.

Connotation and Characteristics of Sustainable Development Management Model of Village Bank

Connotation of sustainable development management mode of village bank

The sustainable development of village banks is in the process of pursuing self survival and sustainable development. We should develop and make full use of resources. It is not only necessary to consider the goals of village banks and their market positions，but also to maintain the profit growth in the field of competition existing and future expansion of business 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.

Characteristics of sustainable development management mode of village bank

Firstly， village banks have small scale of operation and simple form of organizations. Village banks are founded in rural areas， therefore， village banks serve for farmers in rural areas， where there are fewer branches， thus business decisions can be made more rapidly. Secondly， village banks have weaknesses. Village banks mainly focus on the groups of individual households， small and medium-sized enterprises and low-income people. According to customers' features，village banks will provide different kinds of services to meet demands of their customers and make full use of the advantages of information， effectively avoiding the problem of inappropriate information in the financing process. Thirdly， village banks' funds are confined in rural areas. The differences between village banks and commercial banks are that village banks take deposits，which will be invested in the area they serve. It is a good way to serve for local economic development and prevent the outflow of funds. Nevertheless， the commercial banks take resident deposits and invest in the developed areas， to some extent， ignoring the development of rural economy.

Categories of Current Sustainable Development Management Model of Village Banks

Village banks are founded in different areas， thus management models are different. We mainly summarized three typical management models， taking Sichuan Yilong Huimin Village Bank， Jilin Zhenlai Guokai Village Bank and Dazu HSBC Village Bank for examples， then provided some references for village banks （Ji et al.， 2012； Lv， 2010； Liao， 2010）（Table 1）.

Table 1 Categories of current sustainable development management model of village banks

Table 2 reflected Yilong Huimin Village Bank's deposit and loan data in 2007-2011. The profit of Yilong Huimin Village Bank had been increasing rapidly since 2007. The achievement was bounded by its effective management model. This "Bank+ Fund Cooperatives" mode of cooperation has served thousands of farmers as its clients， to some extent， it can reduce the risk of Yilong Huimin Village Bank and improve its efficiency as well， make convenient for farmers in daily life and provide funds. As a new type of rural financial institution， Yilong Huimin Village Bank would pour more fresh blood to local economic development and play a positive role in rural economy.

Table 2 Deposit and loan data in 2007-2011 （Units： ten thousand RMB）

Comparison of Four Village Banks' Management Models

Village bank is a new rural financial institution which is responsible for its own profit and loss. It aims to serve the agriculture， rural areas and farmers. There are distinctions in management models because economic development is unbalanced and the North-South gap continues widening in China. We took Bayan Rongxing Village Bank， Sichuan Yilong Huimin Village Bank， Baoshang Village Bank and Shanxi Ansai Village Bank for examples and compared their economic situations， then proceeded to summarize the advantages and disadvantages of Bayan Rongxing Village Bank （Table 3）.

Table 3 Comparison of four village banks' management models

Bayan Rongxing Village Bank was founded by Harbin Bank in Heilongjiang Province， which expanded its business actively and started agricultural loans in 61 administrative villages， 12 towns and 121 natural villages. It provided agricultural loans about 830 000 000 RMB and benefited 31 000 households. The amount of loan to five small and micro enterprises reached 4 850 000 RMB. The village banks supported 229 individual business， the loans reached 40 930 000 RMB. Bayan Rongxing Village bank paid more and more attention to expend kinds of loans as well as house mortgages， which included loans to women for their running business， re-employment of laid-off business loans， put salaries up for collateral and so on. As the credit for village banks' excellent business，at the second Chinese Micro Finance Institutions Association Annual Meeting in 2012， it was awarded the "most social responsibility award".

By comparing with other village banks， the advantages of Bayan Rongxing Village Bank were reflected in the following aspects. Firstly， Bayan Rongxing Village Bank focused on agricultural loans. The loans aimed at individual farmers and the proportion of agricultural loan reached 90%， differing from other three village banks. As Bayan Rongxing Village Bank had more individual investors and fewer medium-sized enterprises， it should seize the key to practice the effective method and increase lending efforts. In accordance with the door-to-door viewing time， loan object， speech and deportment occasions to reduce Bayan Rongxing Village Bank's nonperforming 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 understood the basic situation of household loans and visited important customers regularly， appointed an expert management to collect information of clients and enhanced communication. Bayan Rongxing Village Bank also broadcasted TV advertisements，hanged the lamp-post advertising and handed out the two batches of leaflets and so on. Thirdly，Bayan Rongxing Village Bank tried to seek development in different ways， but one that could not be ignored was carrying out the agency business. Bayan Rongxing Village Bank sold the financial products of Harbin Bank and Industrial Bank， which not only diversified the type of service， accelerated the speed of development， but also benefited to clients and let them join into the financial boom. Drawbacks were as follows. Firstly， Bayan Rongxing Village Bank was lacking of collateral （Li， 2010； Tian， 2012）. It mainly implemented the five-household and threehousehold joint guaranty and sold fewer. Unlike other three village banks' management modes， Baoshang Village Bank had the pasture management authority as collateral （Wang， 2011）. Although Heilongjiang Province has implemented the mortgage of land management right and land use right in individual pilot areas， it hadn't been implemented in larger areas yet， to some extent， it had restricted the farmers' and enterprises' demands. Secondly， Bayan Rongxing Village Bank's website construction wasn't satisfied. Among the four village banks， only Baoshang Village Bank had built website， making it convenient for customers to understand its information. That was where Bayan Rongxing Village Bank should learn from Baoshang Village Bank. While paying attention to the market， Bayan Rongxing Village Bank should not ignore the construction of website for it was an important channel for customers to understand the village bank.

Premier Choice of Bayan Rongxing Village Bank Sustainable Management Model

Comparing with other three banks， Bayan Rongxing Village Bank lacked scientific cooperation mode，as well as website construction. In view of the existing problems， we put forward some reasonable suggestions to promote Bayan Rongxing Village Banks' development （Table 3）.

Financial environment construction

During the investigation， we found that the government supported Bayan Rongxing Village Bank's development， but there were no specific clauses to guide it， and the government made few efforts to support it， there were few fiscal deposits in Bayan Rongxing Village Bank and most of them were deposited in commercial banks. What's more，although Bayan Rongxing Village Bank was weaken in absorbing funds， the tax amount was very huge and it brought great pressure to the development of Bayan Rongxing Village Bank that it paid 13% deposit reserve （45 000 000 RMB）. At the same time， the local Banking Regulatory Bureau was also intensive. Bayan Rongxing Village Bank had to survive under the pressure of the government， the People's Bank of China and Banking Regulatory Bureau.

To construct a good financial environment， firstly Bayan Rongxing Village Bank should pay attention to implementing environmental construction， with a good governance structure and incentive mechanism. Uncertain and imperfect factors still exist in rural area， the government's policy support and financial regulatory measures played a "wind vane" role in the development of Bayan Rongxing Village Bank， which will make it develop quickly （Zhang， 2010）. Bayan Rongxing Village Bank should maintain a good longterm cooperative relationship with the government. The government can become a shareholder of this village bank to support and pay tax ratio deposit to it. This process not only suppresses the situation that commercial banks with funds， but do not develop business in rural area， while village banks extend agricultural business but suffer from the status that they have no money. Take the government's reputation as a brand， change the public idea that Bayan Rongxing Village Bank is a personal bank. It is a good approach for Bayan Rongxing Village Bank to deposit and vigorously devote great efforts to loan business. But if the government becomes a shareholder in Bayan Rongxing Village Bank， to a certain extent， it will become the "accessory" and miss the opportunity to develop freely and subject to government instructions. In this aspect， Bayan Rongxing Village Bank should do the preparatory work before the government takes shares， the government should strictly control the proportion of shares and make it play its own role in the development （Sun， 2012）.

Carrying out "Bank+Enterprise+Cooperative" model

Bayan County had the title of "the NO.1 pig-breeding country"， the output quantity was very considerable and it focused on meat processing. There were five large food groups in total. Shuanghui and Yurun Group pig breeding， slaughtering and processing settled in 2012. Although Bayan Rongxing Village Bank has limited money to large enterprises， the maximum loan amount can't exceed 10% of the registered capital（5 000 000 RMB）， it should seize the opportunity to develop， create mutual win-win cooperation mode as an innovation with five new cooperatives. Bayan Rongxing Village Bank can refer to Sichuan Yilong Huimin Village Bank's management model and find an effective road to develop.

The government plays an important role， whose responsibility is to form an actively cooperation between Bayan Rongxing Village Bank and enterprises. The Third Plenary Session of 18 pointed out to encourage rural cooperative economy， the government may actively encourage farmers to cooperate with others in the unit of villages. Bayan Xingtai and Fengyuan Farmers Specialized Cooperatives Association were established by four pig farming cooperatives. On the other hand， Bayan Longyu Planting Professional Cooperatives brought abundant raw material resources to the local meat processing enterprises. The enterprises and cooperatives not only adjust pigs' price， but also guarantee the stability of the supply of enterprises. In order to solve the problem that Bayan Rongxing Village Bank loans to large enterprises unactively， it should carry out the loan business actively， for the part that it couldn't meetcustomers' demands， it should turn to its original bank for help， then it played the agent's duty （Table 3）.

Carrying out "separation of mortgage" model

The Third Plenary Session of 18 had brought an opportunity to develop rural finance. The "Decision" that the Central Committee of the Communist Party of China had deepen the reform of some major issues that ensured farmers' homestead usufructuary rights， reformed the rural system， chose some pilots，carefully and steadily pushed forward the housing property rights， guaranteed farmers' rights. It would help to alleviate problems， explore the channels for peasants to increase property income and promote the development of personal financial service in rural areas.

Agricultural loans almost took 90% of the total loan in Bayan Rongxing Village Bank's loans accounted. In addition to reduce the proportion issued to agricultural loans of Agricultural Bank gradually， the lending rate of Bayang Rongxing Village Bank was lower than other banks. If Bayan Rongxing Village Bank intends to improve the present situation and has difficulties in financing， the innovation of collateral would be a good way， instead of relying on credit loan. Heilongjiang Province has vast territory and abundant resources， Bayan County is the center of corn and soybean planting， Bayan Rongxing Village Bank should follow the policy of the Third Plenary Session of 18 and take this opportunity to innovate loan mode which based on the original loan mode（Table 3）. It should formulate farmers' land scientifically， ensure that Bayan Rongxing Village Bank provide this service to clients in time and make steps to carry out the "three rights". The government should carry out the "three rights" certificates， clear the right of contracted management of rural land， forest right and rural residents housing property， which can not only define ownership and ease the right of management， but also promote the reform of rural financial system. The government should establish a property of trading platform right in the village， explain the transaction processes， provide mortgage registration and handle disputes， at the same time，Bayan Rongxing Village Bank can make use of this platform for integration resources， establish agricultural loan mortgage service stations and solve the problems of agricultural loans while reducing the business risk and the rate of bad loans.

Focusing on network construction

The village banks' websites can reflect the multiple plates about them， for example， dynamic information，organization frame， management status， financial products etc.， as well as increasing clients' awarenesses of credit product， making it convenient for clients to download the loan application. Therefore， Bayan Rongxing Village Bank should absorb the advantages of Baoshang Village Bank， actively carry out the construction of website （Table 3）. Considering the present situation， Bayan Rongxing Village Bank and Xinglong branch need to improve the hardware equipment. System development and maintenance need to be conducted under the guidance of the original bank in order to enhance the visibility of Bayan Rongxing Village Bank. The website construction of Bayan Rongxing Village Bank is important， which provides the platform and security for the development of network payment system. The website construction can not only make convenience for the business process， but also for customers. Therefore， Bayan Rongxing Village Bank should keep up with the pace of other village banks. Bayan Rongxing Village Bank shouldn't ignore the network construction while there's less business. Strengthening the construction of website can give information to clients and promote Bayan Rongxing Village Bank's development.

Joining payment and settlement system

In recent years， the network provides convenience to the residents. The development of China's financial industry comes along with the support of network. Most banks joined the unionpay system and debitcard which influenced residents' life deeply. But for village banks， the bank card business is very difficult that people can only take passbook to apply for a bank card. "The People's Bank of China， the China Banking Regulatory Commission about village banks， loan companies， rural mutual cooperatives，loan company related policy" made provision for payment and settlement management. The four types of institutions had the conditions to be added to RMB bank settlement account management system and network check of citizen identity information system in accordance with the relevant provisions of the People's Bank of China. In line with the conditions of village banks， they can join the large amount payment system， in accordance with the relevant provisions of People's Bank of China's micro payment system and the image exchange system， but the document didn't point out that in which conditions village banks could be consistent to join the large amount payment system. 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 lose the most basic functions. At present， Bayan Rongxing Village Bank still adopts the traditional way for the residents to deposit service， thus it doesn't charge fees. This approach not only limits Bayan Rongxing Village Bank's deposit and quantity of loan business， but also makes inhabitants inconvenient. Now problems of small scale， weak technical force and risk control abilities etc. still exist in Bayan Rongxing Village Bank. Village banks have no direct mode to the payment system as identity of the participants. There were two mainly indirect modes. One was that the original bank played the role of the agent one， the other was that commercial banks provided agency services.

Bayan Rongxing Village Bank actively coordinates with local People's Bank of China， smoothing the way to join the micro payment system， thus seek to coordinate with People's Bank of China. The interconnection will fail， if Bayan Rongxing Village Bank is unable to join the system. Although most village banks are using the first mode， there is a problem that original bank is loath to be an agent for occupying the parent bank capital. At the present，Bayan Rongxing Village Bank should improve the hardware equipment， the recruitment of technical personnel， determine the credit risk prevention， then it must coordinate with the original bank to take part in its pay system and pay amount of agency fees. If Bayan Rongxing Village Bank has the ability to join payment system and develop the system， it will open bank card application by itself. Bayan Rongxing Village Bank should not avoid reform because of its small size and weak technical conditions. It doesn't have the basic functions if Bayan Rongxing Village Bank has no Alipay， online payment， POS machine and ATM machine. Only with scientific and rational reforms can Bayan Rongxing Village Bank make contributions to the local economy and achieve better development.

Conclusions

By summing up the sustainable development management models of village banks in different regions in China， taking examples of Bayan Rongxing Village Bank in Heilongjiang Province， Sichuan Yilong Huimin Village Bank， Baoshang Village Bank and Ansai Village Bank， we pointed out that innovation was important in the operation mode of village banks. Village banks brought successful management modes from other village banks， applied them to improve village banks' management models and explored suitable models for their own operations. Although the "Bank+Enterprise+Cooperative" mode，loan pattern and the network system didn't apply practically， village banks could seek the sustainable development in the process of reform and make progresses in the sustainable development. The village banks' goals were to support the development of the rural economy and only standard bank could bring benefits to farmers and promote the improvement of new socialist countryside.

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F830 Document code： A Article lD： 1006-8104（2015）-04-0075-08

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: 1250432592@qq.com

* Corresponding author: Wang Ji-heng， professor， supervisor of Ph. D student， engaged in the research of rural finance. E-mail: jihewang@sina.com