Research on the Effect of Agricultural Industry Chain on

Agricultural Financing under the Background of Rural Revitalization

Muqi Yuan and Ying Zhu

Business School of Hunan Normal University, Juzizhou street, Yuelu District, Changsha City, Hunan Province, China

Keywords: Rural Revitalization, The Entire Agricultural Industry Chain, Financial Connection, Measurement Model.

Abstract: The article clarifies the role of the entire agricultural industry chain in agricultural financing. The orderly logit

empirical test shows that, compared with the entities that make loans in the name of individuals, agricultural

business entities that participate in and rely on loans for the entire industry chain have a higher loan amount

and are more secure, but the problem of difficulty in repayment has not been effectively resolved. Based on

this, this article puts forward corresponding countermeasures and suggestions.

1 INTRODUCTION

The 19th National Congress of the Communist Party

of China clearly put forward the implementation of

the rural revitalization strategy, and the resolution of

the "three rural" issues is the top priority of the party's

work. The Central Economic Work Conference and

the Central Rural Work Conference emphasized

promoting agriculture through quality and green

agriculture. Accelerate the transformation of

agriculture from the direction of increasing

production to the direction of improving quality,

accelerate the modernization of agriculture and rural

areas, and realize the revitalization of rural industries.

Among them, the revitalization of the agricultural

industry is the core. However, the development of

agricultural industrialization is inseparable from

financial support, and the huge demand for

construction funds is often difficult to meet. At the

same time, traditional agricultural financing has

inherent shortcomings, such as a single model,

uncontrollable risks, lack of guarantees, and

inconsistencies between the financing period and the

capital use cycle. Therefore, the dilemma of

agricultural financing has become a major issue in the

implementation of the rural revitalization strategy.

Wang Laixi (Wang 2016) pointed out that rural

financial institutions have a single business model,

and the financial supply for new agricultural business

entities is far from meeting their needs; Tian Jianying

(Tian 2018) based on the survey and research of 55

agricultural industry chain financing practices in

Zhejiang Province, pointed out that the problem of

the mismatch between traditional financing methods

and the financing needs of the agricultural industry

chain has become increasingly prominent, and the

financing bottleneck of agricultural tangible assets

needs to be broken; Gao Yunsheng et al. (Gao, Jing,

Kang, 2021) proposed that under the new investment

model of the entire industry chain, through the

linkage of upstream, middle and downstream

industries, investment costs can be reduced and the

level of international operation and management of

private enterprises can be improved. Among them,

discussing agricultural financing from the perspective

of the entire agricultural industry chain provides a

new idea for solving rural credit problems.

Agricultural financing is an important pillar of

rural revitalization, and the entire agricultural

industry chain is the trend of future agricultural

development. Therefore, this article aims to explore

the financial linkage issues of the entire agricultural

industry chain and clarify whether the role of the

entire agricultural industry chain in agricultural

financing is helpful to alleviate agricultural financing

dilemma. With the goal of optimizing financial

allocation, it puts forward relevant policy

recommendations based on the characteristics of the

financial linkage of the entire agricultural industry

chain in China at this stage.

780

Yuan, M. and Zhu, Y.

Research on the Effect of Agricultural Industry Chain on Agricultural Financing under the Background of Rural Revitalization.

DOI: 10.5220/0011349300003440

In Proceedings of the International Conference on Big Data Economy and Digital Management (BDEDM 2022), pages 780-785

ISBN: 978-989-758-593-7

2 RISE BACKGROUND AND

DEVELOPMENT STATUS

Under the guidance of the strategic deployment of

rural revitalization, strengthening the main body

strength and realizing the benefits of the agricultural

industry chain have become the main direction of the

current rural industrial development. In response to

the agricultural financing dilemma, scholars have put

forward solutions to the problem of agricultural

financing difficulties from all sides. Zhang Jingrui

(Zhang 2016) took the county wine industry in Hebei

Province as an example, and analyzed in depth the

advantages of the agricultural value chain financing

model with "agricultural enterprise + industrial

chain" closeness, low regulatory costs, and high

financing capabilities; Tao Ling, Zhang Lezhu, etc.

(Tao, Xiong, Zhang, 2021) made special discussions

on trade credit financing, British Airways credit

financing without guarantee insurance, and bank

credit financing with guarantee insurance under the

"company + farmer" type agricultural industry chain

financing and government subsidy mechanisms. It

also proposes an agricultural financial plan for the

above-mentioned financing types.

Under the structure of the entire industry chain,

corporate financing mechanisms are no longer single.

Except for bank guaranteed loans, material subsidies,

support funds, and the "government-school-

enterprise" three production-university research

bases have formed the "support bar" of the entire

industrial chain; With the advancement of Internet

technology, farmers can now provide multiple loan

services online. This method is an unsecured credit

guarantee based on rural credit cooperatives and

through the village committee. It has high timeliness,

fast receipt, wide coverage, and low threshold.

However, there are also problems that the loanable

amount is small, which is limited to small-scale

production by farmers. Although compared with the

traditional agricultural development model, the

whole industry chain has unique advantages, but

there are still some drawbacks of the traditional

model. In the process of replacing the traditional

agricultural model with the entire industrial chain, the

country also needs to keep improving, solve the

problems of the existing chain, and realize the

transformation and upgrading of the agricultural

industrial chain.

3 DESCRIPTIVE ANALYSIS

A total of 98 interview data were collected by visiting

government departments and enterprises,

cooperatives and farmers participating in the entire

agricultural industry chain. Among them, 58 data are

from Hunan, 21 data are from Chongqing, and 16 data

are from Sichuan. The remaining small parts of the

data are from Jiangsu, Gansu, Guangdong and other

places, of which 84 data are directly involved in the

entire industry chain.

Table 1: Descriptive analysis of items.

Variable name meaning Corresponding meaning of item Expected value Standard deviation

age age

1-5 corresponds to an increase in

age/population

2.893 1.098

member Family population 3.833 0.980

Edu education level

1=-4 corresponds to the improvement of

academic qualifications

2.619 0.981

income income 1-5 Corresponding to income increase 3.738 1.121

type

Types of agricultural business

entities

1=Ordinary farmers; 2=Family farms;

3=Professional households; 4=Agricultural

companies

2.345 1.256

join

Whether to join the whole

industry chain

0=no; 1=yes

1.238 0.428

depend

Whether the loan depends on

the industrial chain

1.345 0.478

rate interest rate

1=within 3%; 2=3%-4%; 3=4%-5%; 4=5%-

6%; 5=6% or more

2.286 1.313

time Repayment period

1=1 within one year; 2=1-3 years; 3=3-5

years; 4=over 5 years

2.726 0.797

quota Loan amount

1-4 Corresponding degree of increase in loan

line

2.262 1.031

difficult Difficulty in repayment 0=Yes; 1=No 2.310 1.371

Research on the Effect of Agricultural Industry Chain on Agricultural Financing under the Background of Rural Revitalization

781

The above table explains the meaning of the items,

and lists the mean and standard deviation. Among

them, whether to join the entire industrial chain and

whether the loan depends on the industrial chain

cannot be quantitatively measured, and is constructed

as a dummy variable of 0 and 1 respectively.

Judging from the characteristics of the age

structure, the survey objects are mainly concentrated

in the 30-50 years old; From the perspective of family

population status, the average family population is

3.82, and the family structure is dominated by nuclear

families and backbone families; From the perspective

of educational level, the distribution of the

educational level of the survey subjects is relatively

balanced, with a large proportion of junior and senior

high school degrees;. From the perspective of

income, the income level of the survey respondents is

quite considerable, and most families have an annual

income of more than 50,000 yuan; From the

perspective of business types, 43.88% are ordinary

farmers, family farms and professional large

households account for about 15%, and agricultural

companies account for 22.45%.

3.1 Participating in the Entire Industry

Chain is Conducive to Financing

for Agricultural Entities

Nearly half of the entities participating in the entire

industrial chain enjoy a loan interest rate of 3%-4%,

and only one-fifth of the entities need to bear an

interest rate of more than 5%. Compared with entities

that do not participate in the entire industry chain,

one-third of the loans have to bear a loan interest rate

of more than 5%, the financing price has been better

controlled. In terms of loan quotas, 76.56% of the

subjects believe that the loan quotas have increased

after participating in the entire industry chain. In

addition, the loan application success rate of

agricultural entities rose from 90% to 98.44%.

Correspondingly, the subjective feelings of the

subjects on the availability of loans are also higher

than the 80% of non-participating subjects at a rate of

81.46%. Generally speaking, participating in the

entire agricultural industry chain can loosen the

financing environment of agricultural entities in

terms of price, quota, and availability to a certain

extent.

According to interview data, in addition to

lowering loan interest rates and increasing loan

quotas, most interviewees believe that participating in

the entire agricultural industry chain has improved

their credibility. In addition, some interviewees

mentioned that some local governments provide

interest-free loan policies and professional technical

support for agricultural entities participating in the

entire industrial chain; Some banks also have

financial product support corresponding to the entire

industry chain.

Table 2: Comparative analysis table of the main loan situation.

Participate in the entire industry

chain

Not participating in the entire industry chain

Loan object Mainly banks and credit unions Small amount of private lending

Guarantee method Mostly guarantee guarantees, mortgage guarantees

Mortgage method

Obvious phenomenon of mortgage

enterprise management rights

Mainly mortgage real estate and management rights

Lending rates Significantly lower Relatively higher

Loan amount Higher Lower

Repayment period Basically the same

Ease of loan Significantly easier Relatively difficult

3.2 The Risk of Repayment Is Still an

Important Issue in Agricultural

Financing That Needs to Be Solved

Urgently

Survey data shows that nearly 70% of agricultural

entities have difficulties in repayment. Among them,

natural disasters are the biggest risk. The subjects

who are unable to repay due to natural disasters

account for 37.5% of the groups with difficulties in

repayment; The instability of agricultural product

prices is the second largest risk factor, and 12.5% of

those who have difficulty in repayment due to the low

market prices of agricultural products;

Another 7.81%

of agricultural entities have difficulties in repayment

due to poor management and low output. Combined

with the content of the interview, most of the

interviewees, that is, agricultural entities, enjoy the

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782

guarantee of the leading enterprises because they join

the entire agricultural industry chain, which reduces

the difficulty of repayment, but there is still a certain

risk of repayment.

4 EMPIRICAL ANALYSIS AND

RESULT INTERPRETATION

Based on the research data, this paper establishes a

regression model with loan quota, loan interest rate,

and repayment period as dependent variables. The

analysis finds that the entire agricultural industry

chain has a significant impact on the loan quota of

financing entities. By clarifying the specific

influencing factors and salient features of loan lines,

this paper evaluates the mechanism of the influence

of the entire industry chain on the financing of

agricultural entities. Since the explanatory variable

loan amount changes are classified and ordered

variables, this article uses the more widely used

multi-point ordered Logit (logistic) regression for

analysis, and the regression model is in the form of:

()

jjx

LnLogit

jjj

,,2,1

⋅⋅⋅=+=

+⋅⋅⋅+−

+⋅⋅⋅+



，

βα

In the evaluation model of loan quota impact

mechanism based on logistic regression analysis, the

dependent variable is the degree of loan quota

change. The independent variables are age, family

population, education level, income, type of

agricultural business entity, whether to join the whole

industry chain, whether the loan depends on the

industry chain, interest rate, repayment period, loan

amount, and whether it is difficult to repay. In order

to improve the parameter estimation accuracy of the

regression equation through the maximum likelihood

estimation method of the overall equation, the

heteroscedasticity robust standard error method is

used to correct the corresponding variance of the

estimator.

Table 3: Stepwise regression diagram.

quota

join

3.603***

(0.933)

2.739***

(0.907)

2.431***

(0.889)

2.128**

(0.836)

depend

2.05***

(0.675)

2.359***

(0.694)

2.612***

(0.652)

difficulty

1.172**

(0.525)

1.438**

(0.583)

member

-0.615**

(0.310)

rate

0.059

(0.271)

time

0.385

(0.369)

income

0.172

(0.317)

age

0.319

(0.339)

-0.511 (0.362)

type

-0.173

(0.292)

obs 84 84 84 84

Note: "()" is the standard deviation, *p＜0.1, **p＜0.05, ***p＜0.01.

The explanatory variables are gradually

introduced into the initial regression model.

Introducing join, the variables pass the z test with a

significance level of 1%, showing a significant

positive correlation, indicating that joining the entire

agricultural industry chain can significantly increase

the loan line of the financing entity. Introducing

depend, the variables pass the z test with a

significance level of 1%, showing a significant

positive correlation. This means that compared with

entities that do not rely on the industrial chain, the

loan amount that relies on the industrial chain will be

higher. The industrial chain helps the credit

enhancement of financing entities, thereby obtaining

a higher amount of loans. Introduce difficulty and

pass the z-test with a significance level of 5%, which

shows a positive correlation. It means that the

increase in the loan amount does not significantly

increase the difficulty of repayment, and the

difficulty of repayment is not related to the loan

amount. Through interviews, it was learned that

repayment is more difficult due to other factors such

as weather and unstable prices of agricultural

products. Introducing other variables, member passes

the z-test with a significance level of 5%, which

shows a negative correlation. It means that the growth

of the family population is inversely proportional to

the loan amount, which is of little practical

significance; Among them, there is no significant

relationship between interest rate and loan line. Since

Research on the Effect of Agricultural Industry Chain on Agricultural Financing under the Background of Rural Revitalization

783

interest rates are mostly uniformly regulated by banks

or the government, the range of changes is small and

will not have a significant impact on loan lines. Since

the main objects are mostly ordinary farmers, the

income gap is not large, and there is no significant

relationship. In addition, there is no significant

relationship between the type of agricultural entity,

the repayment period, age, education level and the

loan amount.

In general, with the introduction of different

variables, the existing variable coefficients and

standard deviations have gradually decreased.

Depend has the greatest impact, with a coefficient of

as high as 2.612, indicating that the loan line relying

on the entire industry chain has increased

significantly; The second is join, with a coefficient of

2.128. It proves that the entire agricultural industry

chain does significantly help solve the dilemma of

agricultural financing. Especially for small-scale

agricultural entities with small income gaps and

similar conditions. The resource integration effect

brought by the industrial chain can produce a

"1+1>2" effect, helping small and micro farmers to

raise funds. However, the increase in the loan amount

will not increase the difficulty of repayment. The

problem of difficulty in repayment is mainly due to

natural disasters and unstable prices of agricultural

products. The entire agricultural industry chain

should provide more help in increasing farmers'

income and repayment.

5 CONCLUSIONS AND

RECOMMENDATIONS

Compared with entities that make loans in the name

of individuals, agricultural business entities that

participate in and rely on loans for the entire industry

chain have a higher loan amount and are more secure,

but the problem of difficulty in repayment has not

been effectively resolved. Based on this, this article

puts forward corresponding countermeasures and

suggestions.

5.1 The Government Attracts

Investment and Establishes a

Financial Innovation Team for the

Agricultural Industry Chain

Local governments can sign investment cooperation

contracts with external companies with strong capital

and rich experience. Companies such as Pinduoduo,

JD.com, and Suning are all accelerating the

deployment of "Internet +" agricultural products

projects. The establishment of a multi-level, wide-

coverage, and sustainable rural financial system that

adapts to the characteristics of "agriculture, rural

areas and farmers" should be accelerated. Including

the establishment of an agricultural industry financial

innovation team. At the same time, the government

should actively assist enterprises in handling project-

related administrative licenses, implement

preferential subsidies for all links of the industrial

chain, and implement dynamic management. The

fiscal policy, taxation policy, industrial policy,

financing policy and other policy resources are more

inclined to projects with better development

prospects and profitability.

5.2 Strengthen the Training of

Farmers and Encourage Self-

Employed Farmers to Participate

in the Entire Industry Chain

Most farmers are still under the economic system of

small farmers, with little self-owned arable land, self-

produced and self-marketed, unstable market, and

weak risk prevention capabilities. The government

can strengthen publicity through local grassroots

cadres, encourage farmers to participate in the entire

agricultural industry chain, and stimulate the

enthusiasm of all participants in the entire industry

chain. Part of the farmers participating in the entire

local industrial chain are satisfied with the purchase

money of the counterpart assistance company, the

scale of planting is small, and their income has not

increased significantly. The government should unite

leading enterprises to increase the training of farmers

to improve their income and ability to resist risks.

5.3 Promote Farmers' Income and

Solve the Problem of Repayment

Based on the integrated circulation model of

production and marketing based on the entire industry

chain, the extensive integration of agricultural self-

employed. Unblocking stable sales channels is

conducive to improving the efficiency of agricultural

operations, improving the efficiency of agricultural

product circulation, enhancing the ability of

agricultural product enterprises and individual

farmers to resist risks, and providing stable order

income. A stable source of funds can prompt farmers

to reduce the difficulty of repayment based on the

expansion of production financing; Increase the

training of farmers in production technology,

promote farmers' income and reduce financial

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pressure; Upstream enterprises should provide

guidance on farmers' financing and production

increase behaviors to achieve the most suitable level

and avoid blind expansion.

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