Signaling Credit-Worthiness: Land Titles, Banking Practices and Access to Formal Credit in Indonesia
It is often suggested that the poor are credit-rationed due to their lack of formal collateral. Using a household survey from Indonesia, we estimate the impact of having a land title on formal credit access. Adopting an instrumental variable approach, we find that having a formal title significantly increases a household's probability of ever having had a formal loan and the observed loan amount. Why land titles increase access to credit is still not clear. Incorporating data from a unique survey of bankers in Indonesia, we will argue that possessing a formal title increases a household's incidences of formal credit not because the value of the title as collateral but because of what possessing a title signals about the household to the banker. We apply a simple model of contract choice to show how title can act as an indirect signal.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202|
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
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.:
- Galiani, Sebastian & Schargrodsky, Ernesto, 2010.
"Property rights for the poor: Effects of land titling,"
Journal of Public Economics,
Elsevier, vol. 94(9-10), pages 700-729, October.
- Sebastian Galiani & Ernesto Schargrodsky, 2010. "Property Rights for the Poor: Effects of Land Titling," CEDLAS, Working Papers 0103, CEDLAS, Universidad Nacional de La Plata.
- Sebastian Galiani & Ernesto Schargrodsky, 2005. "Property Rights for the Poor: Effects of Land Titling," Business School Working Papers proprightspoor, Universidad Torcuato Di Tella.
- Michael R. Carter & Pedro Olinto, 2003.
"Getting Institutions “Right” for Whom? Credit Constraints and the Impact of Property Rights on the Quantity and Composition of Investment,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 85(1), pages 173-186.
- MICHAEL R. CARTER & Pedro Olinto, 2000. "Getting Institutions 'Right' for Whom: Credit Constraints and the Impact of Property Rights on the Quantity and Compostiton of Investment," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 433, Wisconsin-Madison Agricultural and Applied Economics Department.
- Carter, Michael R. & Olinto, Pedro, 2000. "Getting Institutions 'Right' for Whom: Credit Constraints and the Impact of Property Rights on the Quantity and Compostiton of Investment," Staff Paper Series 433, University of Wisconsin, Agricultural and Applied Economics.
- Lanjouw, J.O. & Levy, P.I., 1998.
"Untitled: A Study of Formal and Informal Property Rights in Urban Ecuador,"
788, Yale - Economic Growth Center.
- Jean O. Lanjouw & Philip I. Levy, 2002. "Untitled: A Study of Formal and Informal Property Rights in Urban Ecuador," Economic Journal, Royal Economic Society, vol. 112(482), pages 986-1019, October.
- Jean O. Lanjouw & Philip I. Levy, 1998. "Untitled: A Study of Formal and Informal Property Rights in Urban Ecuador," Working Papers 788, Economic Growth Center, Yale University.
- Quy-Toan Do & Lakshmi Iyer, 2008. "Land Titling and Rural Transition in Vietnam," Economic Development and Cultural Change, University of Chicago Press, vol. 56, pages 531-579.
- Frank Place & S. E. Migot-Adholla, 1997.
"The Economic Effects of Land Registration on Smallholder Farms in Kenya: Evidence from Nyeri and Kakamega Districts,"
University of Wisconsin Press, vol. 73(3), pages 360-373.
- Frank Place & S. E. Migot-Adholla, 1998. "The Economic Effects of Land Registration on Smallholder Farms in Kenya: Evidence from Nyeri and Kakamega Districts," Land Economics, University of Wisconsin Press, vol. 74(3), pages 360-373.
- Boucher, Stephen R. & Guirkinger, Catherine & Trivelli, Carolina, 2005. "Direct elicitation of credit constraints: Conceptual and practical issues with an empirical application," 2005 Annual meeting, July 24-27, Providence, RI 19272, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Daron Acemoglu & Simon Johnson, 2005.
Journal of Political Economy,
University of Chicago Press, vol. 113(5), pages 949-995, October.
- Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-55, September.
- Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, vol. 53(2), pages 339-371, August.
- Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
When requesting a correction, please mention this item's handle: RePEc:ags:aaea05:19120. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.