Identifying credit constraints using direct elicitation methodology: the case of Indonesia

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Abstract

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.
Original languageEnglish
JournalInternational Journal of Governance and Financial Intermediation
Volume1
Issue number1
DOIs
Publication statusPublished - 1 Dec 2018

Keywords

  •  access to finance, A2F, credit constraints, direct elicitation methodology, DEM, Indonesia

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