Social networks and informal financial inclusion in China

Shijun Chai, Yang Chen*, Bihong Huang, Dezhu Ye

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)

Abstract

Using the 2011 China Household Finance Survey (CHFS) database, we explore the heterogeneous impacts of social networks on informal financial inclusion for Chinese urban and rural households. We find that social networks significantly increase the probability of households’ participation in the informal financial market, augment the size of informal financial transaction, and raise the ratio of informal lending over the total household assets. We also identify the mechanisms through which the social networks affect households’ participation in the informal financial market. By reducing information cost, perceived risk and precautionary saving, social networks play a larger role for urban households than rural households. Notably, the effects of social networks on informal finance are strengthened with the development of formal financial market.

Original languageEnglish
Pages (from-to)529-563
Number of pages35
JournalAsia Pacific Journal of Management
Volume36
Issue number2
DOIs
Publication statusPublished - 15 Jun 2019

Keywords

  • Formal financial market
  • Informal financial inclusion
  • Perceived risk
  • Precautionary savings
  • Social networks

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