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The demand for credit, credit rationing and the role of microfinance

Author

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  • Enjiang Cheng
  • Abdullahi D. Ahmed

Abstract

Purpose - – The purpose of this study is to examine the demand for credit and credit rationing conducted by formal, informal and emerging microfinance lenders in the four poor counties of China. Design/methodology/approach - – This paper extends the existing studies on credit rationing in rural China by comparing the determinants of credit rationing by three different lenders, the formal lenders rural credit cooperatives (RCCs), the informal lenders and the new microfinance institutions (MFIs). Findings - – MFIs are capable of reaching out to the even poorer households if they develop the loan products based on the income and expenditure flows of these households. Research limitations/implications - – The determinants of credit rationing by three types of institutions are estimated separately. Practical implications - – RCCs in China shall change their policy of discrimination against female-headed households. RCCs shall also simplify the loan application procedures and assess the clients based on their repayment capacities rather than the age or assets alone. RCCs could learn from MFIs to use incomes from migrant workers as a criterion to assess the loan applicants. Social implications - – gender equity for loan access. Originality/value - – This paper extends the existing studies on credit rationing in rural China by comparing the determinants of credit rationing by three different lenders, the formal lenders (RCCs), the informal lenders and the new MFIs.

Suggested Citation

  • Enjiang Cheng & Abdullahi D. Ahmed, 2014. "The demand for credit, credit rationing and the role of microfinance," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 6(2), pages 295-315, April.
    • Handle: RePEc:eme:caerpp:v:6:y:2014:i:2:p:295-315
    DOI: 10.1108/CAER-07-2012-0076
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    Citations

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    Cited by:

    1. Icíar García-Pérez & María Ángeles Fernández-Izquierdo & María Jesús Muñoz-Torres, 2020. "Microfinance Institutions Fostering Sustainable Development by Region," Sustainability, MDPI, vol. 12(7), pages 1-23, March.
    2. Abrego, Adriana & Guizar, Isai, 2017. "Resilience of Agricultural Microfinance Institutions to Rainfall Shocks," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258031, Agricultural and Applied Economics Association.
    3. Liqiong Lin & Weizhuo Wang & Christopher Gan & David A. Cohen & Quang T.T Nguyen, 2019. "Rural Credit Constraint and Informal Rural Credit Accessibility in China," Sustainability, MDPI, vol. 11(7), pages 1-20, April.

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