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Journal of Integrative Agriculture  2021, Vol. 20 Issue (4): 927-942    DOI: 10.1016/S2095-3119(20)63484-0
Section 2: Poverty alleviation through industrial development Advanced Online Publication | Current Issue | Archive | Adv Search |
Impacts of formal credit on rural household income: Evidence from deprived areas in western China
CHEN Si1*, LUO Er-ga2*, Lita ALITA3, HAN Xiao4, NIE Feng-ying5
1 College of Mathematics and Informatics, South China Agricultural University, Guangzhou 510642, P.R.China
2 Department of Agricultural Economics and Management, School of Public Affairs, China Academy for Rural Development (CARD), Zhejiang University, Hangzhou 310000, P.R.China
3 Environmental Policy Group, Wageningen University, Hollandseweg 16706, KN Wageningen
4 China Agricultural Science and Technology Press, Chinese Academy of Agricultural Sciences, Beijing 100081, P.R.China
5 Agricultural Information Institute, Chinese Academy of Agricultural Sciences, Beijing 100081, P.R.China
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Abstract  Financial support is a crucial part of China’s poverty alleviation effort.  Thus, it is vital to understand how formal credit impacts income growth in rural households.  In 2012, 2015, and 2018, a survey was conducted to obtain a panel dataset of 592 rural households from 6 poverty-stricken counties in western China, including counties in Guizhou, Yunnan, and Shaanxi provinces.  We use the data to examine the effect of formal credit on rural household income and the mechanism that underlies this effect.  We find that formal credit can significantly increase rural households’ income in deprived areas in western China.  Furthermore, formal credit promotes the reallocation of household labor from the agricultural sector to the non-agricultural sector and changes rural households’ decisions about investment-consumption behavior.  These are the drivers of changes in the amount and structure of household income.  Further analyses show that formal credit may widen income inequality among rural households in western China’s deprived areas.  The individual characteristics of rural households, such as different levels of material capital, human capital, and social capital, bring about differences in the effects of formal credit on income growth.  This study emphasizes that the implementation of formal credit is an essential strategy for poverty alleviation in underdeveloped areas, but policymakers should not excessively interfere with the financial market.
Keywords:  formal credit        rural household income        rural finance        poverty-stricken areas in western China  
Received: 01 June 2020   Online: 11 November 2020   Accepted:
Fund: The authors acknowledge the financial supports from the National Natural Science Foundation of China (71661147001), the National Social Science Fund of China (16ZDA021), and the Guangzhou Social Science Fund, China (2018GZYB45).
Corresponding Authors:  Correspondence NIE Feng-ying, Tel/Fax: +86-10-82109901, E-mail:    
About author:  CHEN Si, E-mail:; * These authors contributed equally to this study.

Cite this article: 

CHEN Si, LUO Er-ga, Lita ALITA, HAN Xiao, NIE Feng-ying. 2021. Impacts of formal credit on rural household income: Evidence from deprived areas in western China. Journal of Integrative Agriculture, 20(4): 927-942.

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