Access to credit by the poor in South Africa: Evidence from Household Survey Data 1995 and 2000
AbstractThis study specifically investigated the factors that influenced access by the poor and Blacks to credit in the segmented financial sector in South Africa, using income and expenditure survey data from 1995 and 2000. The study sheds light on the extent of financial sector deepening through household participation especially among the poor and Blacks, in the context of the fight against poverty. In this study, three types of credit were identified. Formal credit was defined to include debts from commercial banks (including mortgage finance and car loans), semi-formal credit included consumption credit (for household assets such as furniture and open accounts in retail stores), and informal credit specifically referred to debts from relatives and friends.Multinomial logit models and Heckman probit models with sample selection were used for analytical work. The results suggest that the poor and Blacks have limited access to the formal and semi-formal financial sectors. At the national level, access to bank credit is positively and significantly influenced by age, being male, household size, education level, household per capita expenditure and race (being Coloured, Indian or White). Being poor has a negative and significant effect on formal credit access. Semi-formal credit access is positively and significantly influenced by household size, per capita expenditure, provincial location (Eastern Cape, Northern Cape, Free State and North West) and being Coloured. The negative and significant factors in determining access to semi-formal credit include being male, rural location, being poor and being White. Informal credit access is negatively and significantly influenced by education level and race (being Coloured or White). Among the poor, access to bank credit is positively and significantly influenced by being male, provincial location (Western Cape, Gauteng and Mpumalanga) and being Coloured. Access to semi-formal credit is positively and significantly determined by household per capita expenditure, provincial location (Western Cape, Northern Cape, North West and Gauteng) and being Indian. Access to informal credit by the poor is positively and significantly influenced by provincial location (Kwazulu Natal and Gauteng). Within the black population, access to bank credit is positively and significantly influenced by age, being male, household per capita expenditure and education level. Semi-formal credit access by Blacks is positively and significantly influenced by household size, household per capita expenditure, education level and provincial location (Eastern Cape, Northern Cape, Free State and North West). However being male, poor and located in a rural area negatively affected access to semi-formal credit by Blacks. Informal credit access by Blacks is negatively influenced by education level, but positively influenced by being located in the Western and Eastern Cape. These findings confirm that improving access to organized credit markets (i.e formal and semi-formal credit markets) by the poor and Blacks, remains important in the fight against poverty.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Stellenbosch University, Department of Economics in its series Working Papers with number 13/2006.
Date of creation: 2006
Date of revision:
credit; poverty; South Africa;
Find related papers by JEL classification:
- N27 - Economic History - - Financial Markets and Institutions - - - Africa; Oceania
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- G2 - Financial Economics - - Financial Institutions and Services
This paper has been announced in the following NEP Reports:
- NEP-AFR-2006-09-30 (Africa)
- NEP-ALL-2006-09-30 (All new papers)
- NEP-DCM-2006-09-30 (Discrete Choice Models)
- NEP-DEV-2006-09-30 (Development)
- NEP-FDG-2006-09-30 (Financial Development & Growth)
- NEP-FMK-2006-09-30 (Financial Markets)
- NEP-MFD-2006-09-30 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zeller, Manfred, 1994. "Determinants of credit rationing: A study of informal lenders and formal credit groups in Madagascar," World Development, Elsevier, Elsevier, vol. 22(12), pages 1895-1907, December.
- Yadav, S. & Otsuka, K. & David, C. C., 1992. "Segmentation in rural financial markets: the case of Nepal," World Development, Elsevier, Elsevier, vol. 20(3), pages 423-436, March.
- M. Mohieldin & P. Wright, 1994.
"Formal and Informal Credit Markets in Egypt,"
Working Papers, Economic Research Forum
9415, Economic Research Forum, revised Oct 1994.
- Mohieldin, Mahmoud S & Wright, Peter W, 2000. "Formal and Informal Credit Markets in Egypt," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 48(3), pages 657-70, April.
- Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 313-18, May.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, American Economic Association, vol. 71(3), pages 393-410, June.
- Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, Elsevier, vol. 53(2), pages 339-371, August.
- Reza Daniels, 2001. "Consumer Indebtedness Among Urban South African Households: A Descriptive Overview," Working Papers, University of Cape Town, Development Policy Research Unit 01055, University of Cape Town, Development Policy Research Unit.
- Andrie Schoombee, 2000. "Getting South African banks to serve micro-entrepreneurs: An analysis of policy options," Development Southern Africa, Taylor & Francis Journals, Taylor & Francis Journals, vol. 17(5), pages 751-767.
- Aleem, Irfan, 1990. "Imperfect Information, Screening, and the Costs of Informal Lending: A Study of a Rural Credit Market in Pakistan," World Bank Economic Review, World Bank Group, World Bank Group, vol. 4(3), pages 329-49, September.
- Bell, Clive & Srinivasan, T N & Udry, Christopher, 1997. "Rationing, Spillover, and Interlinking in Credit Markets: The Case of Rural Punjab," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 557-85, October.
- James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, National Bureau of Economic Research, Inc, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
- Cally Ardington & David Lam & Murray Leibbrandt & James Levinsohn, 2004.
"Savings, Insurance and Debt over the Post-Apartheid Period: A Review of Recent Research,"
SALDRU/CSSR Working Papers, Southern Africa Labour and Development Research Unit, University of Cape Town
065, Southern Africa Labour and Development Research Unit, University of Cape Town.
- Cally Ardington & David Lam & Murray Leibbrandt & James Levinsohn, 2004. "Savings, Insurance And Debt Over The Post-Apartheid Period: A Review Of Recent Research," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 72(3), pages 604-640, 09.
- Bell, Clive, 1990. "Interactions between Institutional and Informal Credit Agencies in Rural India," World Bank Economic Review, World Bank Group, World Bank Group, vol. 4(3), pages 297-327, September.
- Vuong Quoc, Duy, 2012. "Determinants of household access to formal credit in the rural areas of the Mekong Delta, Vietnam," MPRA Paper 38202, University Library of Munich, Germany.
- Vuong Quoc, Duy, 2011. "Are households’ poverty levels in Mekong Delta of Vietnam affected by access to credit?," MPRA Paper 35412, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Melt van Schoor).
If references are entirely missing, you can add them using this form.