Influence Of Midwest Farmers Income Quality And Loan Behavior Linkage

Rural households’ income growth is the foundation and key to solve “Three RuralIssues”. The Document No.1of the Central Government every year has put forward on theimprovement of households income growth and emphasized that government should spare noefforts to increase households’ income since2004. Among the numerous announced measuresof increasing households’ income, it is one of the most effective ways to recognize theinfluencing factors of households’ credit in accuracy and make credit policies with higherdegree of pertinence. Related researches indicated that households’ income is a significantfactor of their credit behavior. However, many existing researches just focused on thathouseholds’ credit behavior is influenced by their income quantity. The researches that howendogenous factors such as households’ income adequacy, stability, structure, cost andknowledge affecting their credit behaviors are limited. The credit policies and productsannounced by financial institutions lack of regional diversity, which causes that credit policiesand products are hard to adapt to rural financial environment and households’ credit behaviorin the Midwest of China. Further, households’ credit demands can not be satisfied because ofthis phenomenon, which reduces financial support function on households’ entrepreneurs andincome growth. As a result, it is very necessary to research the households’ credit behaviorand their factors from the perspective of the households’ income quality.Depending on existing research results, the paper studies the influences of incomequality on rural households’ credit behaviors in the Midwest from the virtuous cycleperspective of “income quality-households’ credit availability-households’ income growth”.The research content consists of following four parts.The first part is to design researchprograms including Chapter1and2, which is composed of research background, researchpurpose, research significance, research framework, related theories and literature reviews etc.The second part is Chapter3, including the basic characteristic of households’ income qualityand credit behavior in the Midwest. According to the research programs and conclusions inthe first part, the second part mainly discusses about the questionnaire design and structure,the situation of special survey conducted in the Midwest and field survey (784samples)results analysis in Shaanxi, Henan province in the Midwest of China. What’s more, this partsums up the essential characteristics and laws of households’ income quality and creditbehavior in the Midwest. The third part is the empirical research consisting of the Chapter4,5 and6. On the basis of conclusions in the second part, this part whose entry point is incomequality explores the mechanism of households’ credit behavior in the Midwest influenced byincome quantity and analyses main factors using the theoretical, cross statistical, variance andeconometric (binary logit model, multivariate logit model and tobit model are used,respectively) analysis. The empirical research mainly includes three aspects. The first aspect(Chapter4) studies effects of income quality on the initial stage of the households’ creditbehavior in the Midwest and analyzes how income quality affects the credit demand. Thesecond aspect (Chapter5) studies effects of income quality on the decision-making stage ofthe households’ credit behavior in the Midwest and analyzes how income quality affects thecredit purpose and channel. The third aspect (Chapter6) studies effects of income quality onthe implementation stage of the households’ credit behavior in the Midwest and analyzes howincome quality affects credit availability and the repayment period. The fourth part is theconclusions and suggestions, which consist of Chapter7. On the basis of summarizingresearch results, this part crystallizes the paper conclusions. As the same time, in line withproblems explored in research process, this part puts forward policy suggestions from theperspective that rural finance developing raises households’ income quality.The paper comes to the following conclusions by researching.(1)The income quality has significant effects on the each stage of households’ creditbehavior in the Midwest of China. Most of the households with lower income quality have thecredit demand for living purpose. They tend to get credit through informal channels. Theircredit availabilities are lower and repayment period are shorter. On the contrary, only a smallproportion of households with higher income quality have the credit demands. A certainproportion of their credits are for investment and production purpose. In addition, they tend toget credit through formal channels with higher credit availability and longer repaymentperiod.(2)There exists a serious imbalance between households’ income quantity and quality.Though the income quantity increases significantly, the major problems as the shortage ofhuman capital stock, the low ability to resist risk and over labor intensity indicate thathouseholds’ income quality is still low in the Midwest of China. The households live insurvival instead of accumulated and invest developing stage overall.(3)According to the samples data, nearly half of the households in the Midwest owncredit demands and preferences. Investment and production credit demands also occupy acertain proportion, which indicates that the traditional agricultural organization form in theMidwest is gradually collapsing and the modern agricultural production system has beenestablishing. (4)There are two channels, normal credit and informal credit where households can getcredit. However, there exist great differences between the two channels’ availability. Theavailability of informal credit is much higher than formal credit. In addition, the obviousfinancial repression and wide credit constraint in the Midwest make that many households’credit demands cannot be satisfied.