Socio-Economic Determinants of Credit Market Participation in Nepal

Abstract

This study examines if socio-economic characteristics of Nepalese households affect the decisions which the households make in credit market. The study uses three logistic model with credit market participation related dependent variables and socio-economic characteristics of households as independent variables. The analysis is carried out using Nepal Living Standard Survey 2010/11 data which is a national survey. The results of this study depicts that the variables, namely, age of household head, size of household, per capita food consumption of household and urban/rural location of household significantly affect the participation of household in the credit market. The variables, namely, literacy status of household head, size of household, size of land of household, per capita food consumption of household, poverty status of household, urban/rural location of household and time required for access to the closest bank for the household significantly affect the choice of source of household loan between formal and informal source. The variables, namely, gender of household head, literacy status of household head, size of household, per capita food consumption of household, poverty status of household and time required to access to the closest bank for the household significantly affect the decisions of household as regards to whether to use loan for business/farm use or for personal use. The findings of this study suggest that socio-economic characteristics of Nepalese households are important in determining decisions which the households make in credit market.