Abstract

The problem of rural financing is one of the major challenges to the emerging China. It is challenging for
government authorities to provide adequate financial resources and access to financial institutions in rural
agricultural areas to farmer households. The development of Village and Township Banks (VTBs) has
remarkably increased since 2008 but the deposit collection of VTBs is comparatively weaker than the loan
disbursement. Despite of facing numerous challenges, establishing within the framework of new-type financial
institutions is playing a significant role for the development of agricultural sector. For the sustainable
development of VTBs, VTBs should set up staff and member incentive system, introduce innovative financial
products; and strengthen the agricultural insurance system. The cooperation between VTBs and the other rural
financial institutions should be developed to meet short-term rural financing gap and to strengthen the
institutional capacity of VTBs. The government’s support in policy formulation and financial assistance is
essential and the local government intervention should be discouraged. An autonomously functioning financial
institution can enhance the sustainable development of rural households’ income, in particular, and the
agricultural sector, in general.

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