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Article
Publication date: 2 March 2020

Danang Budi Santoso, Christopher Gan, Mohamad Dian Revindo and Natanael Waraney Gerald Massie

This study investigates the welfare impact of microfinance on rural households in Indonesia. Its finding will bridge the gap in the Indonesian microfinance literature.

Abstract

Purpose

This study investigates the welfare impact of microfinance on rural households in Indonesia. Its finding will bridge the gap in the Indonesian microfinance literature.

Design/methodology/approach

The research was conducted by collecting primary data and administering a structured questionnaire to rural households in Bantul District, Yogyakarta Province, Indonesia. We employed the logistic model to measure welfare impacts of microcredit borrowers.

Findings

The research finds that purpose of loan, monthly income, monthly expenditure, interest rates, loan amount, education and marital status have significant effects on the probability of increasing borrowers' welfare after accessing microcredit.

Practical implications

This study will propose some policy recommendations for Indonesian policymakers that may yield better strategies to help improve the impact of their microcredit programmes on the welfare of rural households.

Originality/value

The authors confirm that the article has not been submitted to peer review, nor is in the process of peer reviewing and nor has been accepted for publishing in another journal. The author(s) confirms that the research in their work is original, and that all the data given in the article are real and authentic.

Details

Agricultural Finance Review, vol. 80 no. 4
Type: Research Article
ISSN: 0002-1466

Keywords

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Article
Publication date: 28 February 2019

Liqiong Lin, Mohamad Dian Revindo, Christopher Gan and David A. Cohen

The rapid growth of credit card use in China poses the potential for card overuse and the accumulation of increased debt. The purpose of this paper is to report on an…

Abstract

Purpose

The rapid growth of credit card use in China poses the potential for card overuse and the accumulation of increased debt. The purpose of this paper is to report on an investigation into the determinants of overall credit card spending and card-financed debt by Chinese consumers.

Design/methodology/approach

This study focusses on two dependent variables: credit card monthly spending and card debt. The spending measure is based on consumer outlay for the month preceding the survey. Card debt is the consumers’ outstanding credit card debt when the survey was conducted. Three groups of independent measures are used: socio-demographic characteristics, card features and consumer attitude towards money. Both card spending and card debt are estimated with OLS methods. Data was obtained from the 2013 China Household Finance Survey of 1,920 households in 29 provinces and 262 counties across China that used credit cards over the survey period.

Findings

The empirical findings suggest consumers’ attitude towards money is more important in explaining card spending and debt variation than socio-demographic characteristics and card features. The credit limit set for a card, obligations to other loans and the method of paying for ordinary shopping exhibit positive effects on both card spending and card debt, while age exhibits a negative effect. Further, card spending is positively correlated with card debts, but the factors that determine card spending do not necessarily affect card debt and vice versa. Minimum card debt payments, cash advances, card tenure and interest-bearing debt have no effect on card spending but have positive effects on card debt. In addition, gender and income have opposite effects on card spending and debt.

Practical implications

The relationships we have documented suggest several actions the Chinese Government could consider dealing with credit card debt risk. Controlling the aggressive promotional campaigns that card issuers use to attract consumers and aggressive credit policies should be a focus of attention. The Chinese Government might, for example, impose minimum age and income requirements for granting credit cards and prohibit issuance of new cards to applicants who are already in debt with other types of credit. In addition, more stringent criteria to curb increases in card limits and tighter control over cash advances made on cards should be applied. Minimum payment amounts can also be increased in order to reduce credit card debt risk.

Originality/value

Despite ample documentation of consumers’ credit card behaviour, the literature is deficient in at least two areas of enquiry. First, most previous research has investigated either credit card spending behaviour or card debt, but not both. Second, with few exceptions, most research has investigated a range of specific factors that affect credit card use. In contrast, this study investigates card spending as well as card debt behaviour using a wide variety of consumer dimensions particularly relevant to credit card use and resulting debt. In addition, this study focusses on Chinese consumers, who traditionally prefer to save first and delay spending. The impact of the rapid growth of credit card use on this traditional Chinese orientation towards spending is dynamic. Documenting the influence of the individual factors examined in this study is likely to be of value to both policy makers and institutions that offer and manage credit in this changing environment.

Details

International Journal of Bank Marketing, vol. 37 no. 2
Type: Research Article
ISSN: 0265-2323

Keywords

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