Access to Microloans for Households with Forest Property Collateral in China

Abstract

About 100 million rural households in China have obtained forest property certification, which could serve as collateral to help households obtain microloans intended for forest management and investment. However, it is still difficult for households to receive these loans using forests as collateral. The strong demand for loans from the Rural Credit Cooperative cannot be met. This paper attempts to understand microloan access behavior using 241 respondents in three typical Chinese counties. It argues that the loan is determined by both the demand from the household as well as the supply from banks. Logistic regression models are used to investigate what might affect accessibility to households’ microloans. Household characteristics like age, education, income, forest characteristics as well as the regional variation of loans are used as explanatory variables. Age, education and income as well as the perception of the bank services are found statistically significant. Other findings include that only half of the respondents who received loans supposed for forest management but use for other purposes. Most importantly, it is found that joint-loan arrangement is more suitable for small-scale households and direct-loan and guaranteed-loans are better match larger property size. A simplified loan-process and discount points would lower transaction costs and improve rural households’ accessibility to microloan using of forest property collateral.