HETEROGENEOUS CHOICE IN THE DEMAND FOR AGRICULTURE CREDIT IN CHINA: RESULTS FROM AN IN-THE-FIELD CHOICE EXPERIMENT

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Abstract
The difficulty of financing agriculture in rural China has hindered the development of China’s rural economy for a long time. The conflicts between the high risk and low profit of farmers has led to a significant imbalance between credit demand and supply. Therefore, understanding the characteristics and preference of credit demand for farmer households is an important problem to solve. In this study, we mainly focus on demand-side of credit in rural China and aims to understand attribute preferences and the willingness of farmers to pay for credit. In chapter one, we introduce the background of current issues in rural finance. Based on related theory of credit demand behavior in chapter two, we choose a discrete choice experiment as the tool to collect data from the field. With a D-optimal and efficient experimental design for the choice experiments, we ultimately calculate the willingness to pay (WTP) using a mixed Logit model. This is described in chapter three. In chapter four, implementation of experiments including identifying attributes and levels, creating the experiment design and designing a complimentary survey provided in detail. We introduce how we did two experiments in five provinces in rural China. After deciding to select interest rate, term of loan, type of loan, type of repayment, type of institution and mobile banking service as attributes, we collected 120 combination, 3600 observations and 300 surveys in first experiment, 81 combination, 3241 observations and 120 surveys in second experiment. Subsequently, in chapter five, the estimating results from conditional Logit and mixed Logit models are provided and discussed. Mixed Logit is highly flexible model that can approximate random utility model, which can be used to estimate the effect of the attributes on utility. Then the results from mixed Logit model are used to calculate WTP, which can measure the change in interest rate associated with a unit change in each attribute. In chapter six, we finally draw a conclusions concerning the nature, characteristics, and preferences for credit demand from previous five chapters. We found that amortization loans with longer term are preferred even though they are highly cost. Farmers are willing to pay more for guaranteed loan and credit loan. Willingness to pay for institutions vary from provinces to provinces, which may be explained by distinct financial environment. The conclusions can provide answer to some extent of questions that why the efficiency of credit demand is and how to ameliorate the severely mismatch of supply and demand of credit in rural china.
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2019-05-30
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Agriculture economics; Agriculture credit demand; Discrete choice experiment; Mixed Logit
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Turvey, Calum G.
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Ifft, Jennifer Ellen
Degree Discipline
Applied Economics and Management
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M.S., Applied Economics and Management
Degree Level
Master of Science
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dissertation or thesis
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