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Rural Credit Constraint and Informal Rural Credit Accessibility in China

Liqiong Lin (), Weizhuo Wang (), Christopher Gan (), David A. Cohen () and Quang T.T Nguyen ()
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Liqiong Lin: College of Economics, Fujian Agriculture and Forestry University, Fuzhou 350000, China
Weizhuo Wang: College of International Business, Dalian Minzu University, Dalian 116000, China
Christopher Gan: Department of Business and Finance, Faculty of Agribusiness and Commerce, P.O. Box 85084, Lincoln University, Christchurch, New Zealand
David A. Cohen: Department of Agribusiness and Markets, Faculty of Agribusiness and Commerce, P.O. Box 85084, Lincoln University, Christchurch, New Zealand
Quang T.T Nguyen: Faculty of Banking, University of Economics—The University of Danang, Da Nang 550000, Vietnam

Sustainability, 2019, vol. 11, issue 7, 1-20

Abstract: This paper investigates the effects of rural households’ demographic characteristics on formal credit constraint, and explores the relationship between informal and formal lending in rural China. Using 2013 China’s Household Finance survey data, the authors apply probit regression models to investigate the effects of demographic factors on formal credit constraint and the household’s decision to borrow from informal credit sources. In addition, the endogenous switching regression model is applied to evaluate the impact of credit constraint on the welfare of rural farm households. The empirical evidence confirms that age, family size, annual household nonagricultural income, level of education, and history of informal borrowing have significant influence over credit constraint. Moreover, annual household nonagricultural income, the presence of children, borrowing from social networks and monthly communication expenses significantly impact rural households’ decision to utilise informal borrowing. Results from the endogenous switching regression model suggest that credit constraint by formal credit sources has no impact on household consumption.

Keywords: China; rural households; credit constraint; informal borrowing; welfare (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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