Dual Credit Markets and Household Access to Finance

Using a new and representative data set of Chinese household finance, this paper documents household access to and costs of finance, along with their correlates. As in most developing countries, informal finance is a crucial element of household finance, and wealth tends to be associated with better access to formal and informal finance. Better financial knowledge shifts loan portfolios toward formal sources relative to informal ones. Connections to the Communist Party are associated with significantly better access to finance in rural areas but not in urban areas. A larger social network is positively associated with access to informal finance. Controlling for household characteristics, rural residents pay interest rates on loans similar to urban residents. Younger residents pay higher rates, while households on firmer economic footing face lower rates. Taking financial classes and college education is associated with higher interest rates for urban residents, suggesting perhaps that financial knowledge coincides with greater demand for credit in areas with more economic opportunity. Overall, the findings suggest that Chinese residents face dual credit markets, with the poor, young, those with poor financial knowledge, and those with larger family sizes relying much more on informal finance, while others are better able to access formal finance.

Bibliographic Details

Main Authors:	Cull, Robert, Gan, Li, Gao, Nan, Xu, Lixin Colin
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2015-10
Subjects:	HOME OWNERSHIP, CREDIT MARKETS, INFORMAL BORROWING, DEPOSIT, FINANCIAL SERVICES, BORROWER, ECONOMIC GROWTH, VILLAGES, TRADE CREDIT, FACILITATION, REPAYMENT CAPACITY, PEOPLE, DEMAND FOR CREDIT, RURAL BORROWERS, FINANCING, FORMAL FINANCIAL INSTITUTIONS, VILLAGE, INTEREST, FINANCIAL LITERACY, TUITION, BIAS, INTEREST RATE, PROPERTY RIGHTS, SMALL BUSINESS FINANCE, ENTREPRENEURS, DISCRIMINATION, BUSINESS NETWORKS, MORTGAGE, WELFARE, COLLEGE DEGREE, LOAN, CREDIT ALLOCATION, TUITIONS, SOURCES OF FINANCE, CREDITWORTHINESS, FORMAL FINANCE, LOAN AMOUNT, BORROWERS, OUTSTANDING BALANCE, COST OF ACCESS, LEVELS OF ACCESS, CORRUPTION, HOUSEHOLD ACCESS, PAYMENTS, INTERNATIONAL BANK, RURAL BANKS, LENDER, FORMAL BANKING, BACK-ALLEY BANKING, BANK LENDING, COST OF LOANS, SMALL BUSINESS, EQUITY CAPITAL, SAVINGS, FINANCIAL PRODUCT, SUPPLY OF FINANCE, INFORMAL LOAN, HOUSING FINANCE, FINANCIAL INSTITUTION, HIGH INTEREST RATES, ACCESS TO FORMAL CREDIT, TERMS OF BANK LOANS, GROWTH OPPORTUNITIES, DEBTS, INFORMAL FINANCE, INTEREST RATES, CORPORATE FINANCE, ACCESS TO FORMAL FINANCE, FINANCIAL INSTITUTIONS, DEBT, FINANCIAL PRODUCTS, LENDERS, FINANCIAL TRAINING, LOANS, INVESTMENT OPPORTUNITIES, ACCESS TO BANK LOANS, ENTERPRISES, FARMERS, CREDIT PROGRAMS, INFORMAL LOANS, REAL ESTATE, BANK FINANCING, FINANCE, FINANCING COSTS, FREE LOANS, INVESTMENT DECISIONS, INFORMATION ASYMMETRY, BANKS, MICRO-CREDIT, COLLEGE EDUCATION, EQUITY, INDICATORS OF ACCESS, HUMAN CAPITAL, HOUSEHOLD FINANCE, CREDIT CONSTRAINTS, BUSINESS FINANCE, CAPITAL, MORTGAGE MARKETS, MICRO-LOANS, FAMILY, ACCESS TO FINANCE, SUPPLY OF CREDIT, BANK, FOREIGN DIRECT INVESTMENT, CREDIT, FORMAL FINANCIAL SERVICES, FINANCIAL INSTRUMENTS, NEW BUSINESSES, URBAN AREAS, HOUSEHOLD, FORMAL LENDING, FINANCIAL EDUCATION, URBAN AREA, REPAYMENT, EDUCATION LEVEL, EXPENDITURES, CREDIT HISTORIES, ENTERPRISE, PROPERTY, SOCIAL NETWORKS, DEMOGRAPHIC CHARACTERISTICS, LOANS FOR BUSINESS, ACCESS TO LOANS, FINANCIAL ACCESS, EMPLOYERS, INTERNAL FINANCE, DIVERSIFICATION, ECONOMIC SYSTEMS, PROFITABILITY, ACCESS TO CREDIT, INTERESTS, ECONOMIC OPPORTUNITIES, BANK LOAN, EMPLOYER, SOCIAL BANKING, BANK LOANS, FINANCIAL DEVELOPMENT, FINANCIAL MARKET, BANK BRANCH, INVESTMENT, FINANCIAL INTERMEDIATION, LOAN PORTFOLIOS, HOUSEHOLDS, INFORMAL CREDIT, COLLATERAL, ECONOMIC CRISIS, ECONOMIC OPPORTUNITY, LOAN AMOUNTS, INFORMAL INSURANCE, BANK BRANCH NETWORK, BORROWING, GREATER ACCESS, INFORMAL LENDERS, FINANCIAL KNOWLEDGE, RURAL BORROWER, REPAYMENT CAPACITIES, DEPOSIT ACCOUNT, CAPITAL INVESTMENT, SOCIAL NETWORK, BANK BRANCHES, FINANCIAL SYSTEMS, INFORMAL FINANCING, FORMAL CREDIT, CREDIT RELATIONSHIP, MEDICAL EXPENSES, PRIVATE ENTREPRENEURS, INCOME GROUPS, CREDIT MARKET, GOVERNMENT INTERVENTION, EMPLOYEES,
Online Access:	http://documents.worldbank.org/curated/en/2015/10/25192577/dual-credit-markets-household-access-finance-evidence-representative-chinese-household-survey https://hdl.handle.net/10986/22867
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