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Access to Credit by Traders in Chinese Agricultural Wholesale Markets

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  • Hu, Lifang
  • Zeng, Yinchu
  • Lopez, Rigoberto A.

Abstract

Using national survey data on 1422 traders in 18 Chinese wholesale markets, we employ a probit model with sample selection to estimate the determinants of agricultural traders’ credit constraints. The econometric analysis shows that application costs that are highly related to social networks and imperfect screening of applicants by financial institutions both discourage potential borrowers and may make them become “self-rationing.” Credit-constrained traders account for 38.78% of traders seeking loans. The empirical results demonstrate that the probability of being credit-constrained is significantly lower for corporations, traders who have higher value assets, traders with more social networks, and traders in a better micro-finance environment.

Suggested Citation

  • Hu, Lifang & Zeng, Yinchu & Lopez, Rigoberto A., 2016. "Access to Credit by Traders in Chinese Agricultural Wholesale Markets," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235449, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea16:235449
    DOI: 10.22004/ag.econ.235449
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    File URL: https://ageconsearch.umn.edu/record/235449/files/Access%20to%20Credit%20by%20Traders%20in%20Chinese%20Agricultural%20Wholesale%20Markets-2016AAEA-P9824.pdf
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    References listed on IDEAS

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    6. Martin Petrick, 2004. "A microeconometric analysis of credit rationing in the Polish farm sector," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(1), pages 77-101, March.
    7. Akoten, John E & Sawada, Yasuyuki & Otsuka, Keijiro, 2006. "The Determinants of Credit Access and Its Impacts on Micro and Small Enterprises: The Case of Garment Producers in Kenya," Economic Development and Cultural Change, University of Chicago Press, vol. 54(4), pages 927-944, July.
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    11. Cox, Donald & Jappelli, Tullio, 1993. "The Effect of Borrowing Constraints on Consumer Liabilities," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 197-213, May.
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    Keywords

    Agribusiness; Agricultural Finance;

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