This paper investigates the determinants of access to formal credit by poor households in South Africa. Despite some progress in poverty reduction in the recent years, it remains astonishingly high by historical and international standards. Access to credit is believed by some scholars to be a primary means to address poverty and improve the standards of living of poor households. Thus, it is necessary to identify the determinants of the propensity to borrow and of the amount that is borrowed. Using 2008-2012 data from the National Income Dynamics Study (NIDS), a Heckman Selection model was estimated. The results from this study suggest that age of the household head, race, educational level, gender, employment, geographic location of households affect the propensity to borrow by poor households in South Africa.
Anang, B.T., Sipiläinen, T., Bäckman, S., Kola, J. (2015) Factors influencing smallholder farmers’ access to agricultural microcredit in Northern Ghana, African Journal of Agricultural Research: 10(24), pp. 2460-2469.
Baffoe, G., Matsuda, H. (2015) Understanding the Determinants of Rural Credit Accessibility: The Case of Ehiaminchini, Fanteakwa District, Ghana. Journal of Sustainable Development, 8: 183.
Baiyegunhi, L. J. S., Fraser, G. C. G., Darroch, M. A. G. (2008) Access to credit and the effect of credit constraints on household welfare in the Eastern Cape Province, South Africa, African Journal of Agricultural Research 2010, 5(16), pp. 2243-2252.
Barslund, M and Tarp F. (2008) Formal and informal rural credit in four provinces of Vietnam”, in: Journal of Development Studies, 44(4): 485‐503.
Chaudhuri, K., Cherical, M. M. (2011) Credit rationing in rural credit markets of India. Applied Economics, 44(7): 803-812.
D’Espallier, B., Guérin. I., Mersland, R. (2009) Women and Repayment in Microfinance, Working Paper RUME no. 2009-02, Provence University/RUME Project, Marseille.
Dallimore, A., Mgimeti, M. (2003) Democratic Banking in the New South Africa: Challenging Contemporary Banking Practices at Grass Roots, Unpublished Report, Durban: Development Research Africa, February, 2003.
Fidrmuc, J., Hake, M., Stix, H., (2013) Households’ foreign currency borrowing in Central and Eastern Europe. Journal of Banking and Finance 37, 1880-1897.
Foltz, J., B. Larson, R. Lopez. (2000) Land tenure, investment, and agricultural production in Nicaragua. Development Discussion Paper No. 738, Institute for International Development, Cambridge, MA, Harvard University.
Freeman, H. A., Ehui, S. K., Jabbar, M. A. (1998) Credit constraints and smallholder dairy production in the East African highlands: application of a switching regression model. Agricultural Economics, 19(1-2): 33-44.
Gertler, P., Levine, D. I., Moretti, E. (2009) Do microfinance programs help families insure consumption against illness? Health Economics, 18: 257-273.
Ha, N. T. T. (1999) An analysis of informal versus formal microfinance for the poor in Vietnam. The Vietnamese - Netherlands Master’s program in development economics, Class 6 (1999-2001).
Ha, V.T. T. (2001) Determinants of Rural Households’ Borrowing from the Formal Financial Sector: A study of the rural credit market in Red river delta region.
Hussein, H.K., Ohlmer, B.O. (2008) Influence of Credit Constraint on production efficiency: The Case of Farm Households in Southern Ethiopia, Department of economics, Swedish University of Agricultural Sciences Sweden.
Islam, A., Maitra, P. (2012) Health shocks and consumption smoothing in rural households: Does microcredit have a role to play?, Journal of Development Economics, 97 (2), pp. 232-243.
Jia, X., Heidhues, F., Zeller, M. (2010) Credit rationing of rural households in China. Agricultural Finance Review, 70(1): 37-54.
Kedir, A. (2003) Determinants of Access to Credit and Loan Amount: Householdlevel Evidence from Urban Ethiopia", International Conference on African Development Archives, Paper 64.
Ksoll, M., Prilla, M., Herrmann, T., Rashid, A., Zentek, T., Strehler, M. (2013) Virtual Living AALLösungen spielend im Alltag verstehen. In Mensch & Computer Workshopband: 383-389.
Lawal, J., A. Muyiwa. (2009) Food security and socioeconomic characteristics of cocoa farming households in Nigeria: support through agricultural biotechnology. Proceedings of the 2nd International e-Conference on Agricultural BioSciences.
Mashigo, M.P. (2007) Extending credit to the low-income and poor households in South Africa: A system of principles, Thesis, University of Johannesburg, South Africa.
Morduch, J. (1995) Income Smoothing and Consumption Smoothing, Harvard Institute of Economic Research Working Papers 1727, Harvard - Institute of Economic Research.
Mujeri M.K. (2015) Improving Access of the Poor to Financial Services. General Economics Division of the Planning Commission, Bangladesh.
Okurut, F. N. (2006) Access to Credit by the Poor in South Africa: Evidence from household survey date 1995 and 2000”, Working Papers 13/2006, Stellenbosch University, Department of Economics.
Omonona, B. T., Lawal, J. O., and Oyinlana, A. O. (2010) Determinants of Credit Constraint Conditions and Production Efficiency among Farming Households in Southwestern Nigeria, African Association of Agricultural Economists (AAAE), Cape Town, South Africa http://purl.umn.edu/95775.
Oyedele, G. A., Akintola, J. O., Raji, M. A. Y., Omonona, B. Y. (2009) Credit constrained condition of farm households and profitability of Agricultural production in Nigeria agriculture, Agricultural Journal, Vol. 4(4), pp.192-201.
Quoc, D.V. (2012) Determinants of household access to formal credit in the rural areas of the Mekong Delta, Vietnam. African and Asian studies, 11: 261-87.
Southern Africa Labour and Development Research Unit. National Income Dynamics Study (2012), Wave 3 [dataset]. Version 2.1. Cape Town: Southern Africa Labour and Development Research Unit [producer], 2016. Cape Town: DataFirst [distributor], 2016
Southern Africa Labour and Development Research Unit. National Income Dynamics Study (2010-2011), Wave 2 [dataset]. Version 3.1. Cape Town: Southern Africa Labour and Development Research Unit [producer], 2016. Cape Town: DataFirst [distributor], 2016
Southern Africa Labour and Development Research Unit. National Income Dynamics Study (2008), Wave 1 [dataset]. Version 6.1. Cape Town: Southern Africa Labour and Development Research Unit [producer], 2016. Cape Town: DataFirst [distributor], 2016
Seefeldt, K. (2015). “Constant Consumption Smoothing, Limited Investments, and Few Repayments: The Role of Debt in the Financial Lives of Economically Vulnerable Families”. Social Service Review, 89(2): 263-300.
Sorokina, O. (2013) Parental Credit Constraints and Children’s College Education, Journal of Family and Economic Issues, Springer, vol. 34(2), pages 157-171, June.
Vaessen, J. (2001) Accessibility of Rural Credit in Northern Nicaragua: The Importance of Networks of Information and Recommendation, Savings and Development, 25(1), 5 - 31.
Vicarelli, M. (2010) Exogenous Income Shocks and Consumption Smoothing Strategies among Rural Households in Mexico, in Job Market Paper, Columbia University, New York.
Wooldridge, J. M. (1995). Selection corrections for panel data models under conditional mean independence assumptions. Journal of Econometrics 68, 115-32.