Research On The Influence Of Financial Literacy On The Availability Of Formal Credit For Households

The availability of household credit demand plays an important role in overcoming the difficulties of household with negative impact on funds,managing intertemporal assets,as well as the preservation and appreciation of wealth.This paper used the 2013 China Household Finance Survey(CHFS)data to study the impact of financial literacy on the availability of formal credit for households.The availability of formal credit is based on the premise that families have formal credit needs.This paper first systematically sorted out the related domestic and foreign literature on household credit constraints about the definition,causes,influencing factors,empirical researches,financial concepts,metrics and household credit constraint impact.On the basis of previous studies,the credit demand and credit availability of Chinese households were described and statistically analyzed,thus determining that formal household credit demand is large and there are serious credit constraint problems in China.Next,the focus of this paper was on whether financial literacy can effectively alleviate the household credit constraint problems in China and improve the availability of formal household credit.After controlling a series of variables which affecting the availability of formal household credit,such as householder characteristics,family social network and family population structure,the basic OLS regression,Probit model and Logit model were constructed for regression analysis,and Robustness test was carried out by replacing the financial literacy level indicators.The conclusions of this paper:On the one hand,the improvement of financial literacy level will increase the family’s demand for formal credit and promote family awareness of loan application;On the other hand,families with higher level of financial literacy are more likely to obtain credit from formal financial institutions,and thus will be less constrained by credit.In addition,it has also been found that China has not only serious credit constrains in rural areas,but also urban areas are facing low loan-to-deposit rates.Therefore,while insisting on the structural reform of the financial supply side,we should also consider correcting the cognitive bias and behavioral bias of our family residents by popularizing financial literacy or guiding the public to use financial services,in order to fundamentally improve the family’ s availability ability of formal credit to activate our financial market.