Low Education or High Education:Which Brings Higher Default Rates?
One of the reasons why credit development is more backward in less developed ru-ral areas is the higher risk of credit default among low and middle income farmers,and identifying the factors influencing credit default is crucial to alleviate farmers'financing constraints.This pa-per explores the mechanism of the influence of education on credit default of low and middle in-come farm households by using the data of 4424 small loans to farm households from CFPA Farm Credit,and conducts robustness tests and endogeneity discussions,using borrowers'personal char-acteristics of education level as the key signal,in two ways:ability to repay and willingness to re-pay.It is found that for low and middle income farmers,education has a significant incentive effect on their credit default,and the mechanism of its effect is that while it enhances farmers'repayment ability,it decreases repayment willingness and ultimately increases the likelihood of credit default.Further analysis reveals that this incentive effect becomes more significant when borrowers reach a certain level of education,breaking the stereotype that borrowers with higher ed-ucation have a lower probability of default and borrowers with lower education are more likely to default.In addition,a multi-cluster study shows that the effect of education level varies,with the effect of education level on credit default of low and middle income farmers being greater when the farmers are located in the east and the loan use is plantation-based production.
Education levelCredit defaultRepayment abilityRepayment willingnessLow and middle income farmers
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