Credit Access and Housing Consumption: The Case of the Housing Provident Fund

Abstract

Unlike credit expansion through banking sectors in western economies, many Asian economies encourage homeownership through housing provident fund (HPF) programs. These programs collect deposits from contributors and their employers and provide home mortgage loans to qualified contributors with discounted rates. This paper evaluates the efficiency of HPFs by studying a natural experiment in China where the amount of home loans available to contributors depends on previous deposits to the fund. Results indicate that after HPF loans became available in 1998, households with two members enrolled in the HPF program enjoyed homeownership 18 percent higher than those with only one member enrolled. Furthermore, each additional year of HPF deposits increased homeownership by 4 percent for both groups. The results suggest that HPF loans allow higher housing consumption for eligible contributors.