What is the Demand for Microcredit? The Case of Rural Areas in Serbia

Interventions in the credit market, such as microcredit programs, are developed under the assumption that low-income individuals are credit-constrained and have a positive demand for credit which is left unsatisfied by existing credit sources. Although there has been a significant expansion of microcredit programs in the world, there is still important potential for low-income individuals that remain credit-constrained, especially in rural areas.This article contributes to the analysis of the gap between supply and demand of credit using empirical results from a study carried out in rural areas of Serbia where there is a combination of substantial credit constraints and a low overall demand for microcredit services.Without directly analyzing household's credit behavior, we evaluate credit demand from rural households through the analysis of consumer preferences, using choice-based conjoint (CBC) methods, commonly used to analyze demand for products that have many attributes. Interestingly, we also find very low demand for credit products that have the conventional attributes of microcredit. We then look at the household characteristics that affect demand for microcredit.From the results of this study, we elaborate on the factors that impede the development of microcredit.