Does forestland possession enhance households’ access to credit?—Examining China's forestland mortgage policy

Jiayun Dong, Wenyuan Liang, Weiping Liu, Jinlong Liu, Shunsuke Managi

Research output: Contribution to journalArticlepeer-review

Abstract

Many countries have seen a rising demand for forest policy reform. This paper explores the effects of China's forestland mortgage policy, a supporting measure for collective forest tenure reform, on household credit access. In theory, the forestland mortgage policy could have three impacts on households: (1) forestland possession could change households’ willingness to access credit (2) forestland possession could enhance household access to credit, and (3) the contract structure follows the theoretical predictions of the credit contract design mechanism. Our results show that households’ willingness to enroll in the mortgage policy as well as their potential to obtain credit increased when households possessed larger areas of forestland. However, the proportion of households that successfully obtained credit were fairly modest. Meanwhile, we found a positive relationship between collateralized forestland and the amount of the forestland mortgage loan, and a negative relationship between collateralized forestland and the interest rate. These findings are consistent with the theoretical predictions of the contract mechanism design. The existing forestland mortgage policy has increased households’ credit access to some extent; however, there is much room for improvement from a policy perspective. This requires divising policy arrangements that would facilitate a fully developed credit market available to households. Forest tenure mortgage loans alone may not be able to fully meet households’ financial needs.

Original languageEnglish
Pages (from-to)78-87
Number of pages10
JournalEconomic Analysis and Policy
Volume68
DOIs
Publication statusPublished - Dec 2020

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)

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