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Poverty-stricken Areas Farmers Demand For Credit And Credit Constraints

Posted on:2008-01-01Degree:DoctorType:Dissertation
Country:ChinaCandidate:X C LiuFull Text:PDF
GTID:1119360242473849Subject:Agricultural Economics and Management
Abstract/Summary:PDF Full Text Request
It is one of the fundamental issues in the rural financial market of developing countries that rural households' demand for formal credit has not been met, which is called credit market failure by economists. At current stage, the rural finance market in depressed area in China has to be confronted with new challenges due to the adjustment of rural economic structure, while sharing the common market failure problem with other developing countries. Most rural households in depressed area whose income is mainly made up of wage no longer essentially play the role of production and management units in the traditional sense, but labor suppliers. Transformed demand of rural households for financial products and service, induced by varying rural economic development, will inevitably exert a profound influence on the development of rural finance in China. Based on the background above, this thesis analyzes empirically rural households' formal borrowing behavior and microfinance project participation, and then from the perspective of the transformation for credit demand, why credit constraint for rural households in depressed area exists and how to alleviate it have been explained and discussed.With first-hand survey data, the thesis applies methods of descriptive statistics and econometrics to investigate empirically the level, feature and influential factors of rural households' demand for formal credit, search for reasons why rural households are credit constrained, as well as explore how microfinance project performs its targeting in China and whether it alleviates rural households' credit constraint or not. Firstly, the author puts forward an improved survey method 'willingness survey and hypothetical questions' to study the loan purpose of rural households' demand for credit in depressed area; Moreover, Demand-identified Bivariate Probit model is employed to succeed in separating impacts of demand and supply on the formal credit market equilibrium. Secondly, it is one of attempts for this paper to depict and investigate the level and feature of credit demand, and why it has not been fully met. Meanwhile, using Probit model, Tobit I and II model, and Heckman two-stage model, it identifies and estimates the factors influencing rural households' demand decision-whether they demand loan or not and what amount they demand. In the investigation on credit supply, Multinomial-Logit model is applied to analyze rural households' credit constraint and formal institutions' credit rationing mechanism. Finally, this paper turns to study microfinance. Using data from three regions which have been pioneering microfinance project, the author tests the targeting of Chinese NGO microfinance project which claims to aim at poverty alleviation, and microfinance credit constraint confronted by rural households in project region is also estimated on the base of controlling the microfinance demand.It is found that middle-and-lower income households in depressed area whose income is mostly made up of wage are lack of demand for production credit. 'The feature of their credit demand can be summarized as non-production, larger credit amounts, longer credit terms and non-pledge. Increased wage income reduces the probability of rural households' demand for formal credit, and non-farm income does not impact formal credit demand but formal credit access. Besides household character, credit products and loan procedure also affect credit demand. Transaction cost rationing and risk rationing impede formal credit demand from being effectively met. Three GB model Microfinance projects don't succeed in targeting poor rural households in the surveyed regions. Beside rural households in project villages being lack of the demand for GB model micro-credit product, why the microfinance target moves from the poor upward to the rich lies in some households who demand for micro-credit being faced with quantity credit rationing due to limits of microfinance project' products and institution.Comparing with the existing concerned literature, the features of this paper have been illustrated as follow. Firstly, under the cross-country, historical-horizon and market-oriented perspectives, this paper attempts to observe and understand rural households' borrowing behavior and the evolution of rural financial market in China. Secondly, it emphasizes the significant influence of repayment capacity and features of the credit product provided by the specific lender on the definition of credit demand, and credit constraint is defined after credit demand has been controlled. The third, information asymmetry, transaction cost and risk are introduced into the analytical framework of the credit demand and the credit constraint, in which rural formal credit market failure in developing countries is investigated from the angle of interior market mechanism. The Forth, the direct willingness survey method is used to identify and measure credit demand and credit constraint which is self-containedly categorized, in which repayment capacity, other credit sector and measurement errors are controlled. At last, with the characteristics of the research issue and survey data being taken into account, this paper applies the improved method of 'willingness survey and hypothetical questions' to control the influence of credit accessibility on the survey of credit demand, uses Tobit II model and Heckman two-stage model to overcome sample selection bias problems, and employs Demand-identified Bivariate Probit model to avoid the hazard to make fallacious interpretations without separating credit demand and credit supply in the model estimation.It is the significance of the above discoveries that would be realized for sustainable rural financial market construction, rural financial reform and poverty alleviation. Firstly, based on the basic judgment of most rural households' demand for consumption credit, rural financial policy must adjust its strategy in order to adapt to the changes of demand for credit. The focus of the future rural finance reform should shift from supporting small-scale production project to developing consumption credit products. Secondly, rural formal financial institutions should make progress on credit product design, lending technology and delivery system, which helps to setting free latent and hidden demand for formal credit. At last, government should improve the outer environment of the rural financial market, speed up the progress of labor market, education, medical care, social security system, infrastructure construction, judicatory system and law, among which it is the most important that government should take the responsibility of protecting and regulating labor market.
Keywords/Search Tags:Rural Finance, Credit Demand, Credit Constraint, Credit Rationing, Rural Credit Cooperatives, Microfinance
PDF Full Text Request
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