An Empirical Analysis of Microcredit on China Rural Household

This study assesses the impact of microcredit on household welfare and women empowerment in rural China. In addition, it examines key factors that influence the accessibility of microcredit by rural households in China.

Microcredit was introduced in China in the mid-1990s. Despite government efforts to popularize microcredit, access to microcredit in rural areas remains insufficient. The paper estimates the impact of microcredit on household welfare using the difference-in-difference approach. It employs logistic regression to analyze accessibility to microcredit by Chinese rural households and the women’s empowerment impact of microcredit. The paper identifies a total of 12 household-related factors that influence households’ accessibility to microcredit. Study findings indicate that microcredit:

• Can significantly improve household welfare such as income and consumption;
• Has a significant impact on five different dimensions of women’s empowerment ranging from economic security to awareness of social and legal issues.

Despite optimistic findings on how microcredit has changed lives in rural areas, results show that the vast majority of program participants are non-poor, which casts some doubts on the social potential of China’s microcredit programs.