Signaling Credit-Worthiness: Land Titles, Banking Practices and Access to Formal Credit in Indonesia

Paul Castañeda Dower and Elizabeth Potamites

No 19120, 2005 Annual meeting, July 24-27, Providence, RI from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: It is often suggested that the poor are credit-rationed due to their lack of formal collateral. Using a household survey from Indonesia, we estimate the impact of having a land title on formal credit access. Adopting an instrumental variable approach, we find that having a formal title significantly increases a household's probability of ever having had a formal loan and the observed loan amount. Why land titles increase access to credit is still not clear. Incorporating data from a unique survey of bankers in Indonesia, we will argue that possessing a formal title increases a household's incidences of formal credit not because the value of the title as collateral but because of what possessing a title signals about the household to the banker. We apply a simple model of contract choice to show how title can act as an indirect signal.

Keywords: Land; Economics/Use (search for similar items in EconPapers)
Pages: 35
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://ageconsearch.umn.edu/record/19120/files/sp05do05.pdf (application/pdf)

Related works:
Working Paper: Signaling Credit-Worthiness: Land Titles, Banking Practices and Access to Formal Credit in Indonesia (2010)
Working Paper: Signaling Credit-Worthiness: Land Titles, Banking Practices and Access to Formal Credit in Indonesia (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea05:19120

DOI: 10.22004/ag.econ.19120

Access Statistics for this paper

More papers in 2005 Annual meeting, July 24-27, Providence, RI from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().