| It is commonly held that rural households in China, especially poorer households, have been credit rationed by formal lenders. This study examined factors that determine a household's propensity to borrow using a formal loan and the likelihood of being credit rationed. The analysis is based on data from a survey of households in Guizhou province. The results suggest that the likelihood to borrow is mainly dependent on household resilience to income volatility, and the likelihood to be credit rationed mainly depends on the household's ability to repay the loan and creditworthiness. In addition, lower-middle-class farmers are the most constrained group. For those households taking formal loans, the purposes of agricultural production and consumption-smoothing are equivalently important in rural Guizhou. |
