Stepping Stone: The Logic of Financial Inclusion through Microcredit in Rural China

Nan Zhou, Wenli Cheng and Longyao Zhang

No 2022-15, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: This paper studies the effect of microcredit on a rural household’s subsequent access to bank loans. Based on a 2018 survey of rural households in 6 Chinese provinces, we find that microcredit served as a stepping stone to bank credit: participation in microcredit improved a household’ probability of obtaining bank loans in the following year by 4.9 percentage points. Notably, the stepping effect was present for both the relatively wealthy households and poor households, if we measure wealth by households’ social capital and assets.

Keywords: Microcredit; stepping stone effect; credit graduation; financial inclusion (search for similar items in EconPapers)
JEL-codes: G21 O16 (search for similar items in EconPapers)
Date: 2022-07-01
New Economics Papers: this item is included in nep-ban, nep-cna, nep-fle and nep-mfd
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