Credit Restrictions, Social Capital, and Farmers’ Credit Availability Evidence from China's Forest Right Mortgages

Using a sample of a field survey of 24 villages in southern China, we study the effects of credit restrictions under the Forest Right Mortgages System (FRMS) in 2008 and how social capital can help alleviate farmers' credit constraints. We find that credit restrictions limit farmers’ credit availability, but social capital can mitigate this effect through rent-seeking and information signaling channels. This study indicates the importance to enhance the collateral value and reduce transaction costs of forest rights