This study considers how credit constraints come to exist and how to identify them. Credit constraints may arise from market mechanisms: the demand for loans and the supply of loans. In order to assess credit constraints, I use direct elicitation methodology and then examine the gathered information and other household characteristics by applying a multinomial logit model. Using an access-to-finance survey conducted by the World Bank, I find that Indonesian households are likely to experience supply-side constraints rather than demand-side constraints. I also find that financial literacy plays a vital role in accessing services from formal financial institutions. I estimate welfare loss by elaborating several types of constraints: households constrained because of risk-related reasons experience a loss in annual income of between Rp 16 million and Rp 19 million.
|Journal||International Journal of Governance and Financial Intermediation|
|Publication status||Published - 1 Dec 2018|
- access to finance, A2F, credit constraints, direct elicitation methodology, DEM, Indonesia