Risks to credit access in a developing economy

Abstract

Governments in developing economies are continuously seeking ways to increase the number of people that have access to formal financial services. However, literature on why households in developing economies are excluded from the formal credit sector is scarce. Thus, this study examines the link between household characteristics and the choice of credit provider using unique household-level primary data from the Niger Delta region. A binomial logistic regression model based on relevant household characteristics is developed for estimation. The results show that the number of dependents and income of a household, as well as education level and age of household head, is relevant in understanding the choice of the credit provider. Strikingly, the finding that the probability of borrowing from the informal sector increases with household distance from a formal lender at a decreasing rate suggests the significance of cost associated with traveling to the nearest bank on the choice of a lender and the presence of information asymmetry in the credit market of the region. Overall, the study raises important implications to inform credit market policies and practices in the region.

Keywords: {'name': 'Household credit, household characteristics, informal credit, distance, formal lending, Nigeria, '}

Authors & affiliations

Uduakobong Inyang
Affiliation not supplied

Deposited references

Supplied references, not a list of publications citing this article.

Abubakar, A. and Gani, I. M. (2013). Impact of Banking Sector Development on Economic Growth: Another Look at the Evidence from Nigeria. Journal of Business Management & Social Sciences Research, 2 (4), 47- 59.

Adeleke, A., (2014).. The informal financial market in Nigeria. Central bank of Nigeria: Understanding monetary policy series, 43, 9-30

DOI: 10.1093/rfs/hhq001

DOI: 10.3923/ajar.2015.155.165

DOI: 10.1016/j.worlddev.2015.08.010

Aryeetey, E. and C. Udry. (1997). The characteristics of informal financial markets in sub-Saharan Africa. Journal of African Economies, supplement to vol. 6(1).

DOI: 10.9734/BJEMT/2014/3883

DOI: 10.1016/0305-750X(96)00001-0

DOI: 10.1080/00220380801980798

DOI: 10.1016/j.worlddev.2013.05.014

DOI: 10.2139/ssrn.2677316

DOI: 10.1016/j.jfineco.2010.10.014

DOI: 10.1086/296668

DOI: 10.1016/S0165-4101(98)00010-X

DOI: 10.1016/S0304-3878(98)00066-2

DOI: 10.1111/j.1467-8276.2007.01009.x

CBN, (2017). 2016 Annual statistical bulletin. Available at;http://www.cbn.gov.ng/documents/statbulletin.asp

Cecile, N., Mihasonirina A., Katherine, D and Sarah, Z., (2013. Formal and Informal Lending. International Bank for Reconstruction and Development / The World Bank, 31-38.

Chen, H. and Volpe, R.P., (2002). Gender differences in personal financial literacy among college students. Financial services review, 11(3), p.289.

DOI: 10.1111/1467-6419.00109

DOI: 10.1016/S1574-0072(06)03056-8

DOI: 10.1080/1351847X.2015.1019641

DOI: 10.1016/j.jfi.2007.07.002

DOI: 10.1016/S0305-750X(01)00112-7

EFInA, (2014). EFInA Access to Financial Services in Nigeria 2014 Survey: key findings. December.

Ehikioya, I. and Mohammed, I., (2013). Commercial bank credit accessibility and sectoral output performance in a deregulated financial market economy: empirical evidence from Nigeria. Journal of Finance and Bank Management, 1(2), 36-59.

DOI: 10.1016/j.jeconbus.2004.03.003

DOI: 10.1007/s10693-013-0176-0

DOI: 10.1111/j.1574-0862.2004.tb00191.x

DOI: 10.1016/0305-750X(92)90056-2

DOI: 10.1111/ecca.12169

DOI: 10.1111/1475-4991.00060

DOI: 10.1016/j.worlddev.2007.07.002

DOI: 10.1111/j.1467-8586.1993.tb00571.x

DOI: 10.1016/S0304-3878(96)00443-9

DOI: 10.1093/wber/4.3.235

DOI: 10.5897/AJAR11.788

DOI: 10.1080/00220389608422456

DOI: 10.1016/S0304-3878(99)00019-X

DOI: 10.1016/j.jbankfin.2008.07.015

Kiplimo, J.C., Ngenoh, E., Koech, W. and Bett, J.K., (2015). Determinants of Access to Credit Financial Services by Smallholder Farmers in Kenya. Journal of Development and Agricultural Economics,7(9), 303-313.

DOI: 10.1016/S0304-3878(97)00020-5

Le K, N., (2003). Investment of rice mills in Vietnam: the role of financial market imperfections and uncertainty. Centre for Development Studies, Netherlands.

Levine, R., (1997). Financial development and economic growth: views and agenda. Journal of economic literature, 35(2), 688-726.

McCarty, A., (2001). Microfinance in Vietnam: A survey of schemes and issues. Hanoi, Vietnam: Department for International Development (DFID) and the State Bank of Vietnam (SBVN).

DOI: 10.1111/j.1540-4560.1995.tb01352.x

DOI: 10.1016/j.foodpol.2014.03.002

DOI: 10.1016/j.jbankfin.2011.09.010

Mohan, R., (2006). Causal relationship between savings and economic growth in countries with different income levels. Economics Bulletin, 5(3), 1-12.

Mohammed, A. D. and Hassan, Z., (2009). Microfinance in Nigeria and the Prospects of Introducing and Islamic Version in the light of Selected Muslim Countries’ Experience. Review of Islamic Economics, 13(1), 115-174

DOI: 10.1016/j.worlddev.2010.05.005

DOI: 10.1016/j.worlddev.2004.01.012

DOI: 10.5430/ijfr.v2n2p61

Ololade, R. A., and F. I. Olagunju (2013). Determinants of access to credit among rural farmers in Oyo State, Nigeria. Global Journal of Science Frontier Research Agriculture and Veterinary Sciences, 13(2), 16-22.

Oloyede, J.A., (2008). Informal financial sector, savings mobilization and rural development in Nigeria: Further evidence from Ekiti state of Nigeria. African Economic and Business Review, 6(1), 35-63.

Oni, O.A., Oladele, O.I. and Oyewole, I.K., (2006). Analysis of factors influencing loan default among poultry farmers in Ogun State Nigeria. Journal of Central European Agriculture, 6(4), 619-624.

DOI: 10.2139/ssrn.3567419

DOI: 10.1111/j.1467-8268.2011.00287.x

DOI: 10.1111/1540-6261.00505

DOI: 10.1111/j.1468-0351.2007.00283.x

DOI: 10.1111/j.1477-9552.2000.tb01228.x

DOI: 10.1108/S1569-3759(2009)0000092008

DOI: 10.1080/14631377.2014.937107

DOI: 10.1111/1467-9361.00004

DOI: 10.1016/j.jdeveco.2010.08.017

DOI: 10.1080/0269217032000064026

DOI: 10.9734/ajpas/2019/v5i230132

DOI: 10.1111/1467-7679.00023

DOI: 10.1016/S0305-750X(00)00006-1

Stiglitz, J.E. and Weiss, A., 1981. Credit rationing in markets with imperfect information. The American Economic Review, 71(3), 393-410.

DOI: 10.1016/S0305-750X(02)00052-9

DOI: 10.2307/2297901

DOI: 10.1002/hec.1605

World Bank, (2016). Ending extreme poverty: Feature story. July 08.

DOI: 10.1016/j.worlddev.2009.10.015

DOI: 10.1353/sor.2008.0024

DOI: 10.1016/0305-750X(94)90181-3