Li ZHOU，Yuhui LI

1.School of Economics and Management，Beijing Forestry University，Beijing100083，China；2.School of Agricultural and Rural Development，Renmin University of China，Beijing 100872，China

By the end of2012，China had verified collective forest land 1 800 million hm2nationwide，accounting for 98.6%of the total collective forest land；1 720 million hm2forest land，95.5%of the overall verified forest land，had been authorized with forest property certificate held by 89.49million peasant households［1］.The reform of the collective forest right system had been focusing on the transfer of forestry property rights.Mortgaging forest property certificate for a petty loan has been implemented nationwide since 2012.However，the collateral for forestry property mortgages such as forest land，forests and forest trees are usually hard to be circulated in the market.In addition，due to the lack of forest insurance and a sound forest assets evaluation system as well as unflavored policies which in turn makes the collateral produce less economic returns and brings many other problems，We need to make use of government's public function and to introduce government investment.Also，it is of great necessity to establish a policy-favored forestry property mortgage mode as well as to enhance the economic externality in and public goods attribute of the industry.

1 Literature review according to classification

There are320 papers with keywords in the title＂forestry＋mortgage＂published in the period of 2000 to 2013 on China Science and Technology Journal Database（CSTJ）and Wanfang Data（MA／PhD papers）.Among the 320 papers，journals and newspaper articles were the most majority，accounting for 41.8%and 32.5%of the overall respectively.25.6%of the papers were almanacs，MA／PhD papers，scientific papers and conference papers.（See Chart 1）In addition，only 12 journals have been downloaded over 100 times，and the most popular one has been downloaded 298 times.Nevertheless，there were only11 papers titled with key words＂forestry mortgage＋small loan＂.Among non－MA／PhD papers，only 20 papers were research reports and case study papers.During the period of 2003 to 2013，when the forestry property mortgage pilot program was started，1112 papers titled with key words＂forestry＋mortgage＂had been published，among which，103 were MA／PhD papers，570 papers were journals and conference papers，together，they composed 60%of the overall.In terms of conference paper and journal，there were only 25%of the overall with more than 100 downloads.Regarding the academic papers，they mainly discussed the demand of forestry property mortgage，influential factors，fund-raising risks as well as financial innovations.Some studied the information system development and the forestry property mortgage mode.Few discussed the issue on the basis of principles of economics.40%of the papers were newspaper articles and almanacs.59 out of all the papers titled with key words＂forestry＋mortgage＂involved＂small loan＂in the title，among which 50 papers were academic papers.

According to the statistics in the literature review，many discussed the issue of forestry property mortgage while few studies have been done discussing petty loan forestry property mortgage.Therefore，further studies in both theoretical and practical terms are needed.

2 Some concepts of rural petty loan forestry property mortgage

2.1 Forestry property and certificates valid for mortgage

Fig.1 Classification of the Literature review of forestry property mortgage during 2000 to 2013

Regarding the study of rural petty loanmortgage，the forest property certificate is the valid credential.Hence，according to Property Law，it can be mortgaged and vouched，which offers legal basis for the transfer of forestry property rights in rural petty loan forestry property mortgage［2］.2004 witnessed the issue of Forest Assets Mortgage Registration Measure（Trial）by China's State Forest Administration［3－4］，according to which stipulates that forest assets owners can mortgage the forest assets for loans without transferring their ownership.Valid forest assets for mortgage include commercial forests，woods and forestland use right.To be more specific，they are timbers，economic forests，fuel woods and forestland use right，cut-over forestland use right and burned forestland use right as well.The Measure also stipulates that once forests or woods assets are mortgaged，the forestland use right will be transferred as well，but the property and function of the forestland must not be changed.According to our investigation，there are three types of forest property rights in the transfer contracts of forestland of Fu county and Xixiang county，Shaanxi：ownership right of forests and forest trees，use right of forests and forest trees and forestland use right［5］.

2.2 Forest property certificate mortgageForest property certificate mortgage means that forest owners（individuals or enterprises）authorized by forestry authorities can mortgage the forest property certificate for loans from financial institutions like banks，rural credit cooperative，etc.［6］.The forest property certificate mortgage is a common mortgage.Forests and woods growing in the ground are immovable property.The PRC，Security Law does not explicitly stipulate that whether the forests and woods growing in a land shall be on the mortgage when the land use right is mortgaged.But in the real situation，forests and land are inseparable.Because once been separated by land，forests will no longer remain immovable property，in which case the forests are not the pledged forests.Furthermore，some scholars［7－8］define the concept from the perspective of current forestry property mortgage mode，i.e.，forest assets owners can mortgage the use right of forests and woods that are under their ownership for loans from financial institutions such as banks and rural credit cooperatives，or from legal guarantee corporations in which case the owners must provide forest property certificate of pledge for counter guarantee.

From the perspective of either collateral or means of mortgage，the common point of defining forestry property mortgage is that through leaving forest property certificate authorized by the State Forestry Administration as a pledge，its owner can borrow money from financial institutions.In 2012，the Rural Policy-favored petty loan Forest Property certificate Mortgage Research Group（hereafter referred to as the research group）from the Beijing Forestry University conducted an investigation on forest peasants in Shaanxi and Fujian.The investigation reveals that at present，major collateral includes woods of commercial forests，forest trees and forestland use right［5］.

2.3 Rural petty loan forest property certificate mortgage

Rural petty loan forestry property mortgage should be classified as forest property certificate mortgage with forest peasants being the lender.Considering the fact that the economic development of different areas varies，the amount of loans will vary accordingly as well.Guidance on Financial Institutions Developing Rural Micro Credit（2007）stipulates that micro credit loans in economically developed regions should be between 100 000 yuang to 300 000 yuan，and micro credit loans in less economically developed regions should be between 10 000 yuan to 50 000 yuan.In 2012，the research group investigated the situation in Fujian and Zhejiang where the micro credit loans are no more than 100.000 yuan inmost cases［5］.

3 The theoretical framework and application of rural petty loan forest property certificate mortgage

3.1 The theoretical framework of rural petty loan forest property certificate mortgageResource allocation is in the most paramount position in economics studies［9］.Resource allocation can only be realized with a prerequisite of the liquidity of resources.Here，the liquidity of resources means transferring property rights，which is in accordance with the Modern Theory of property rights.Thanks to the transferability of property rights，resources can be accessed by those can take full use.Hence，their economic potential can be fully realized.As a result，it will give assets added values and make the society develop further economically.When delimitation of property rights belongs to an individual，the economic development will be restricted.Nevertheless，the transfer of property rights can restructure property rights，which，therefore，will reduce transfer costs and realize scale benefit in a bid to optimize resource allocation［10］.

The core problem of reforming collective forest right system in Southern China is property rights.We should explicitly define ownership of forests and forest trees，their use right and forestland use right.The reform aims to establish a modern forest property right mode，according to which' every mountain has an owner，every owner has his／her rights and obligations，and performing obligations brings owners benefits.'This is a new property right mode that diversifies the business subjects.Forest property certificate，as a certificate of family property，plays an important role in liquidizing family property and therefore utilizes family resources.In China's current stage，most financing is realized by means of forest property certificate mortgage，which is in accordance with basic theory of economics and modern theory of property Rights in legal terms.

Furthermore，regarding the characteristics of economics in the forestry industry，the industry is public goods in ecological，societal and economic terms.And in terms of ecological public forest that has few economic returns，its ecological benefits are enjoyed by the entire society for free which demonstrates the industry's positive externalities；while its negative externalities are embodied as the deforestation in the process of economic development which impairs the benefits that an ecological forest industry provides the public［12］.As a result，at present，China's forest as sets manifest strong positive externalities.Considering the public attributes and economic positive externalities of the forest industry，it is necessary to call for government interventions.While from the perspective of property right theory，due to the limited harvesting rights to the forest trees，the property rights of major forest resources have been restrained accordingly［13－15］.Hence，the collateral for petty loan forest property certificate mortgage is seldom used in the market and utilized.Regarding this，it is reasonable to call for government establishing policy-favored petty loan forest property certificate mortgage mode.

3.2 Field study in rural petty loan forest property certificate mortgage

3.2.1 The application of foreign petty loan mortgage mode.The Forest property certificate is only exited in China.The rural petty loan mortgage is popular in many foreign countries.Common collateral is property ownership certificate，homestead etc.Represented by Bank Rakyat Indonesia and BancoSol of Bolivia，this foreign petty loan mortgage mode focuses on management of the loan and its sustainability.In this type of mode，generally，the banks set a high interest rate，and the favored target customers and target industries are small business owners and agriculture and industry.In addition，under the condition of guaranteeing the sustainability of the institutions or businesses，the poor and women are prioritized to receive a loan.Inmost cases，the petty loan mortgage institutions have explicit financial incentive policies.By making up social welfare policy，financial policy as well as tax policy and transfer payment policy etc.，the government can encourage financial institutions that provide petty loan mortgages developing with sustainability so as to better service for the poor［16］.Bangladesh has set up specialized credit banks providing petty loan mortgages for poorer people，such as Grameen Bank，a bank that aims to provide loans for the poor in rural areas.The Bangladeshi government also gives the bank financial support with only 4%－5%loan interest rate as well as tax breaks and legal supports and allows the bank to operate financial trading in the form of NGOs［17］.Common opinions regarding petty loan mortgage mode in the international community are：first，it should provide financial services for people with low income（includes impoverished people）；second，it should operate with the prerequisite of sustainable development［18－19］.The application of institutionalized petty loan mortgage mode suggests three factors that contribute to successful operations：① an effective management.② well-trained employees.③necessary financial supports that can enable rural credit institutions to function well in line with the peasants' best interests［16］.

Regarding this，a successful petty loan mortgage mode will depend on financial supports as well as certain favored policies through which the government can perform its public functions.To be more specific，by raising capitals，the financial institutions can reallocate social resources.As a result，the income gap between the poor and the rich can be narrowed.Therefore，the success of foreign mortgage mode can be taken as a reference in terms of setting up China's own policy-favored petty loan forest property certificate mortgage mode.Nevertheless，considering the application，further research should be continued.

3.2.2 Petty loan forest property certificate mortgage mode in China.China has started forest assets mortgage mode since 2003.In January 2009，Tsinghua University and State Forestry Administration as well as Forestry Bureau of Fujian jointly held Petty Loan Forest Property Certificate Mortgage and Forest Insurance Policy Seminar.In addition，pilot programs of petty loan forest property certificate mortgage have been started nationwide.At present，the forest property certificate mortgage mode that mainly focuses on enterprises and major forest businessmen is in line with the market mechanism and has become comprehensive step by step.But petty loan mode for peasants remains to be improved［20］.Huang Jianxing［21］believes that low and middle income groups in rural areas need loansmost but they are the very people who have the slightest chance to receive a loan.Due to the absence of rural financial service platforms and products，people's financial demand cannot be met.According to the research group，over the period of2010 to 2012，470 questionnaires had been issued to forest peasants in Qing Liu County，F(xiàn)ujian，Lin'an County，Zhejiang，and Xixiang County as well as Fu County，Shaanxi.90%of the surveyed peasants needed 50 000 yuan or less petty loan.However，there are few effective countermeasures regarding this.

Some scholars have analyzed and concluded the current situation of rural forestry property mortgage mode by means of empirical studies.Yang Yun et al.［8］suggest that forestry property mortgage should include four modes：individual forestry property mortgage，joint forestry property mortgage，credit forestry property mortgage and industry-guaranteed forestry property mortgage as well.Wu Shengguang［22］concludes that rural forestry property mortgage has three operating modes：① Yong'an Mode，F(xiàn)ujian.It adopts the principle of development finance and is therefore guaranteed by government's credit.② Lishui Mode，Zhejiang.This mode encourages financial innovative services and products for forest property reform，such as petty revolving loans，direct forest property certificate mortgage and purchasing and storage center guaranteed loan.③ Kuandian Mode，Liaoning.This is a comprehensive mode to some extend involving forest property trading，evaluating and registering.The mode provides a platform for forest property certificate mortgage by media advertising and offering handouts and guidance.While Zhang Hanbing［23］concludes five modes：

Direct Mortgage Mode，F(xiàn)inancial institution＋Guarantee corporation＋Peasant Mode，F(xiàn)inancial institution＋Government credit platform＋Peasant Mode，F(xiàn)inancial institution＋Private credit platform＋Peasant Mode and Financial institution＋Leading companies＋Peasant Mode.

These studies have imposed significant influence on the study of rural petty loan forest property certificate mortgage，particularly on guiding government's responsibilities and its policy implementation in the case of Yong'an mode，F(xiàn)ujian.Petty loan forest property certificate mortgage has multiple operating modes，such as petty revolving loan operating mode in the case of Lishui，Zhejiang and petty loan forestry property mortgage mode in the case of Kuandian，Liaoning.Nevertheless，considering the peasant petty loan，these studies are lacking systematic policy and economic return analysis.

3.2.3 Challenges in China and suggestions.According to stakeholder theory，the major stakeholders in petty loan forest property certificate mortgage are government，the financial sector，forest peasants，forest assets evaluation institutions and insurance companies as well.There are many problems in applying China's petty loan forestry property mortgage：first，from the perspective of government，the in explicitness of forestry property mortgage right restricts the transfer of its use right［11］；forest peasants find hard to have forest property certificate that can function as collateral due to unflavored policies；thanks to annual quota for tree felling policy，the risks of loan repayment have been strengthened；the government should further implement financial discount policy and compensation policy for ecological benefits.Second，regarding the perspective of financial institutions，few have services aiming to forestry mortgage.In addition，the loan period is too short and confronting many challenges，for example，loan products are not designed in line with the characteristics of the forest industry［24－25］；the application procedures are complicated with strict collateral stipulations；tight lending standards make the capital raising more expensive which in turn raises the risks of tracking loans and regulation［26］；disposal of repayment and security and compensation mechanism have yet been setup［27］.Third，from the perspective of forest peasants，thanks to the hard access to loans，the costs become higher and the returns less；furthermore，the natural risk in the industry is high［28］.Fourth，many forest assets evaluation institutions are not professional and qualified.Fifth，insurance products have not aimed for the industry.For example，the forest insurance supply can not meet the demand of the industry.Other problems include：few types of insurance，strict insurance subject，disaster claim difficulties etc.As a result，the business risks in the industry for forest peasants have not been effectively reduced.

Regarding these issues，some scholars suggest that：（i）more national policies such as discount policy for petty loan forestry property mortgage should be introduced；Preferential tax policy should be introduced；risk reserve system for petty loan forestry property mortgage should be set up［29］.The government's public function should be fully performed，and we should establish an overall social service system，market-oriented intermediaries as well as online trading platform［26］.（ii）Financial institutions should release multiple types of loan products for petty forestry property mortgage and setup an effective inside regulation system.（iii）In terms of the collateral for petty loan forestry property mortgage，comprehensive and sound forest assets evaluation institutions should be founded，where a scientific and effective evaluation system should be established in a bid to making a reasonable price for forest assets［30］.（iv）We should set up compulsory insurance mechanism in order to reduce the natural risks of the industry［31］.Overall，rural petty loan forestry property mortgage involves multiple stakeholders.Therefore，it requires supports of public policy and financial supports which means financial subsidies，transfer payment policy and prime rate offered by financial institutions.By referring to agricultural loan risk management，we can introduce risk compensation policy to financial institutions as well，and forest trees should be included in the rural compulsory insurance.

4 Conclusion

To sum up，we believe that capital raising in China's forest industry should focus on an improved forestry property mortgage mode backed by policies in the near future.Nevertheless，the studies of petty loan forestry property mortgage have yet been well-supported with a theoretical framework.In addition，most are quantitative studies，yet little qualitative research has been done.From the perspective of national mode and policy，by applying modern economic theories such as property rights economics and institutional economics，some problems in forestry property mortgage have been solved to some extent.In terms of rural policy-favored petty loan forestry property mortgage，both theoretical and practical studies of influential factors of loan products，the economic principles of loan supplier and receiver，policy influence，government's function in rural financial markets as well as the effectiveness of service implementation remain to be proved by quantitative research and empirical studies through applying economic mathematics，economics，rural financial theories.

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