Impact of devolved forest tenure reform on formal credit access for households: Evidence from Fujian, China

The Collective Forest Tenure Reform, as a devolved forest tenure reform, was first launched in Fujian, China, in 2003, issuing forestland-use certificates to and increasing forestland access for rural households, allowing households to collateralize forestland for formal credit. This study aims to identify the impact of forestland-use certificates and household forestland and further explain their channels of impact on formal credit access. The conceptual framework in the literature includes two potential channels of impact: household's willingness to formal credit access and the institutional constraint in formal credit access. An econometric analysis was conducted using panel data of household level in Fujian province from 2012 to 2016. The econometric results demonstrated that: (1) forestland-use certificates had a significantly positive impact on the households’ formal credit access when it is measured only as formal credit by collateralizing forestland; (2) household forestland had significantly positive impact on households’ formal credit access when it is measured as total formal credit and formal credit by collateralizing forestland; (3) households’ willingness to access credit was significantly and positively affected by forestland-use certificates and household forestland, although the impact of household forestland is more certain and (4) institutional constraint in formal credit access was significantly and positively impacted by forestland use certificates but not by household forestland. Our study contains implications on the appropriate use of formal credit as a financial instrument in devolved forest tenure reform.