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Social Trust Formation and Credit Accessibility—Evidence from Rural Households in China

Author

Listed:
  • Tong Zhang

    (National School of Agricultural Institution and Development, South China Agricultural University, Guangzhou 510642, China)

  • Huiting Liu

    (College of Economics and Management, South China Agricultural University, Guangzhou 510642, China)

  • Pinghan Liang

    (Center for Chinese Public Administration Research and School of Government, Sun Yat-sen University, Guangzhou 510275 China)

Abstract

Trust as a form of social capital plays an important role in improving the cooperation between agents, especially in credit lending activities. Trust building has attracted significant research interest, and gift giving has been shown to be one of its main drivers. Nonetheless, the mechanism of gift giving in the formation of trust networks and the channels through which gift giving and trust affect cooperation require further investigation. In this paper, we first separate social trust into community trust and personal trust, and we examine how gift giving affects the formation of each level of trust. We then explore how trust and gift giving affect rural households’ access to formal and informal sources of credit. Our results show that gift giving mainly helps in forming trust at the personal level rather than the community level. In turn, personal and community trust can facilitate access to informal and formal sources of credit, respectively. In addition, personal trust facilitates access to informal loans for consumption and medical expenses but not production. Overall, our findings show that gift giving is mainly used to build personal trust which facilitates access to informal lending for risk-sharing purposes.

Suggested Citation

  • Tong Zhang & Huiting Liu & Pinghan Liang, 2020. "Social Trust Formation and Credit Accessibility—Evidence from Rural Households in China," Sustainability, MDPI, vol. 12(2), pages 1-14, January.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:2:p:667-:d:309543
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    References listed on IDEAS

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