Social Network and Family Lending: Evidence from Rural Areas in China

This paper systematically study relationship between social network and credit constraints under background of financial dualism in the countryside. The survey of China Family Panel Studies (CFPS) in 2014, as an example, is used in this work. The results of the empirical analysis show that social networks can significantly increase the financing ability of formal finance and informal finance in the rural areas. The more richer the social network for farmers, the more higher they have obtained financial loans to formal financial and informal. The impact on the borrowing of friends is higher than the impact of bank lending in the social network of rural areas. The conclusions indicate that the credit market of rural areas from china, an imperfect credit system, should fully exert an important role of social network in the informal system for alleviated credit constraints of countryside better.