Human Capital, Social Capital, and Farmers’ Credit Availability in China: Based on the Analysis of the Ordered Probit and PSM Models

Jiaojiao Liu,Jun Zhang,Chongguang Li,Gangren Zhang

doi:10.3390/su12041583

Abstract

Rural credit is very important to the increase of farmers’ income and the development of rural economy, and it has attracted wide attention from scholars. Many scholars have paid attention to the impact of social capital on farmers’ credit availability, but the research conclusions have not yet been unified. In addition, human capital is also one of the important factors that scholars pay attention to. However, the research mainly focuses on farmer education and pays less attention to their health. Based on the China Household Income Project (CHIP2013) database, we evaluated the impact of human capital (education and health of farmers) and social capital on the credit availability of farmers. To ensure the robustness of our results, we used both the ordered probit model and the propensity score matching (PSM) model to carry out the estimations. Therefore, the study not only improves the research framework of the impact of human capital on farmers’ credit availability, but also uses a more accurate method to estimate the net impact of social capital on farmers’ credit availability. The results showed that, firstly, in terms of human capital, farmers’ educational and health levels have a significant positive impact on their formal credit availability, but no significant impact on their informal credit availability. In particular, farmers with a high school education or above are more likely to obtain a formal loan. Secondly, in terms of social capital, interpersonal relationship capital and political relationship capital are beneficial for farmers obtaining loans from formal and informal channels. Organizational relationship capital only has a more significant positive impact on the informal credit availability of farmers. These results imply that formal financial institutions not only pay attention to farmers’ human capital but also their social capital to reduce the risk of lending. However, informal lenders, that is, relatives or friends, pay more attention to the social capital of farmers.

Highlights

The development of the rural economy cannot do without the support of rural finance [1]
This study mainly aims to answer the following question: “Do human and social capitals have a significant impact on the credit availability of farmers?” We mainly use an empirical analysis to test, including ordered probit and propensity score matching (PSM) models
In order to reduce the impact of multicollinearity between human and social capitals on the estimation results, we referred to the treatment of Ding et al [44]

Summary

Introduction

The development of the rural economy cannot do without the support of rural finance [1]. A relatively perfect rural financial market can significantly improve farmers’ technical efficiency and increase their income and consumption [2,3]. At present, the credit constraints on farmers are still relatively serious in China, especially the credit constraints from formal financial institutions. Further research found that the welfare of farmers with credit constraints has been significantly reduced. Kumar et al [4] found that credit constraints had a negative impact on farmers’ health and education expenditures, food consumption, and agricultural investment. Researchers have focused on methods to reduce the credit constraints on farmers or improve their credit availability. The impact of material capital and social capital on the credit availability of farmers has received considerable attention

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Results

Conclusion