Dual Credit Markets and Household Access to Finance : Evidence from a Representative Chinese Household Survey

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 fi...

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Bibliographic Details
Main Authors:	Cull, Robert, Gan, Li, Gao, Nan, Xu, Lixin Colin
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
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 http://hdl.handle.net/10986/22867

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Summary:	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.

Dual Credit Markets and Household Access to Finance : Evidence from a Representative Chinese Household Survey

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