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Heterogeneous choice in the demand for agriculture credit in China: results from an in-the-field choice experiment

Rong Kong (Northwest Agriculture and Forestry University, Yangling, China)
Yanling Peng (Institute of Regional Economy and Finance, Sichuan Agricultural University, Chengdu, China)
Nan Meng (Dyson School of Applied Economics and Management, Cornell University S C Johnson College of Business, Ithaca, New York, USA)
Hong Fu (Shandong University of Finance and Economics, Jinan, China)
Li Zhou (Nanjing Agricultural University, Nanjing, China)
Yuehua Zhang (Center for Social Welfare and Public Governance and School of Public Affairs, Zhejiang University, Hangzhou, China)
Calum Greig Turvey (Dyson School of Applied Economics and Management, Cornell University S C Johnson College of Business, Ithaca, New York, USA)

China Agricultural Economic Review

ISSN: 1756-137X

Article publication date: 29 October 2020

Issue publication date: 1 June 2021




In this study, the authors examined demand-side credit in rural China with the aims of understanding attribute preferences and the willingness of farmers to pay for credit.


The authors implemented an in-the-field discrete choice experiment (DCE) using a D-optimal block (6 × 9 × 3) design applied to 420 farm households across five Chinese provinces (Shandong, Sichuan, Shaanxi, Jiangsu and Henan) in the summer and fall of 2018. The DCE included six attributes including the interest rate, term of loan, type of loan, type of repayment, type of institution and mobile banking services.


Conditional and mixed logit results indicated a downward sloping credit demand curve with variable elasticity across regions. Provincial willingness-to-pay (WTP) indicators suggested that farmers were willing to pay a premium for long-term ( 0.03–0.687%) and low collateral credit loans ( 0.79–2.93%). Also, four of five provinces indicated a preference for loan amortization rather than lump-sum payment. Interestingly, in comparison to the Agricultural Bank of China (ABC), only farmers in Shandong, Sichuan and Shaanxi indicated a preference for rural credit cooperatives (RCCs)/banks and the Postal Savings Bank of China (PSBC). Another quite surprising result was bank services, in our case, access to mobile banking did not appear to induce WTP for agricultural credit. While conditional and mixed logit regression coefficients were similar (and therefore robust), the authors found that there was substantial heterogeneity across attribute preferences on term of loan, type of loan and amortization. Preferences for type of lender and mobile banking were generally homogenous. This result alone suggested that lenders should consider offering a suite of credit products with different attributes in order to maximize the potential pool of borrowers. While there were some differences across provinces, farmers appeared to be indifferent to lenders, and it did not appear that offering banking services such as mobile banking had any bearing on credit decisions.

Research limitations/implications

This paper presents a first step in using in-the-field choice experiments to better understand rural finance in China. Although the sample size satisfies conventional levels of significance and rank conditions, the authors caution against attributing results to China as a whole. Different provinces have different institutional structures and agricultural growing conditions and economies and these effects may differentially affect WTP for credit. Although by all indications farmers were aware of credit, not all farmers, in fact a minority, actually borrowed from a financial institution. This is not unusual in China, but for these farmers, the DCE was posed as hypothetical. Likewise, the study’s design was based on a generic credit product typical of rural China, and the authors caution against making inferences about other products with different attributes and risk structures.

Social implications

This study is motivated by the rapidly changing dynamic in China's agricultural economy. With specific reference to new laws and regulations about the transfer of land use rights (LURs), China's agricultural economy is undergoing significant and rapid change which will require better understanding by policy makers, lenders and practitioners of the changing credit needs of farmers, including the new and emerging class of commercial farmers.


To the best of the authors’ knowledge, the authors believe that the result provided in this paper present the first use of in-the-field DCE and are the first to be reported in either the English or Chinese literature on rural credit product design.



This study was completed under project 111 funding, Central University of Finance and Economics, Beijing PRC with advisors and principal investigators Ming Zhou and Ken Seng-Tan. Rong Kong is a professor, Northwest Agriculture and Forestry University, Yangling, Shaanxi. Yanling Peng is an assistant professor at Sichuan Agricultural University, Chengdu; Nan Meng is a former graduate student, Dyson School of Applied Economics and Management, Cornell University; Hong Fu is an associate professor, Shandong University of Finance and Economics, Jinan; Li Zhou is a professor, Nanjing Agricultural University; Yuehua Zhang is a professor at Zhejiang University; Calum Turvey is W.I. Myers Professor of agricultural finance, the Dyson School of Applied Economics and Management, Cornell University, Ithaca NY. This work was drawn from Nan Meng's MS graduate thesis, the Dyson School of Applied Economics and Management, Cornell University, which was supported by the W.I. Myers Endowment Fund. Additional support was provided by the National Natural Science Foundation of China (no.71773094; 71903141), Humanities and Social Sciences of Education Ministry (18YJC790125) and China Postdoctoral Science Foundation (2019M653834XB). Address comments to Calum Turvey


Kong, R., Peng, Y., Meng, N., Fu, H., Zhou, L., Zhang, Y. and Turvey, C.G. (2021), "Heterogeneous choice in the demand for agriculture credit in China: results from an in-the-field choice experiment", China Agricultural Economic Review, Vol. 13 No. 2, pp. 456-474.



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