Social and Ecological Impacts of Household Credit on Pastoral Areas and Policy Implications
Research Questions: (1) What are the changes, current situation, and uses of microcredit? What are the issues of microcredit programs' design? (2) As the capital inflow from outside communities, how microcredit affect the social system and ecological system, respectively? (3) What are the long-term impacts of microcredit programs on the grassland SES feedbacks?
Methods: Interviews and surveys with herds, local communitity leaders, bankers, and local government agencies. Statistical analysis, econometrics panel models, and dynamic stochastic general equilibrium models (DSGE) were employed.
Main Findings: (1) The difficulty for herders to obtain microcredit is reduced, and the repayment rates increase; the main use of microcredit is to buy hay; loan and repayment requirements do not align with the husbandry production cycle or consider the highly variable weather, and this misalignment forces pastoralists to borrow from usurers to repay bank loans. (2) Using microcredit to purchase hay increases loan-to-value ratio (LTV); borrowing from usurers to repay bank loans caused by the misalignment increases the loan amount of the next term and the liability-asset ratio; the high initial loan amount increases the risk of livelihood and livestock production for the next few years. (3) Using microcredit to purchase hay increases stocking rates; the high initial loan amount leads to high stocking rates for the next few years. (4) Microcredits provide funds to buy hay from outside communities, and decouple the feedback between forage yield and livestock numbers, increasing livestock numbers beyond the forage yield potential for the land. At the same time, using microcredit to buy hay can increase the cost of animal husbandry and reduce disposable cash, thus increasing livelihood risks. Vulnerable grasslands with low productivity are more sensitive to the changes of microcredit programs' policies; decreasing interest rates are more conducive to reducing payment burden and the recovery of vulnerable grasslands; excessively raising the credit line will exacerbate the degradation of vulnerable grasslands.
Products:
1. Lu, Y., Huntsinger, L. and Li, W. 2022. “Microcredit programs may increase risk to pastoralist livelihoods in Inner Mongolia”. Ambio, 51, 1063–1077.
2. Lu, Y., Yu L., Li, W., and Aleksandrova, M. 2022. “Impacts and Synergies of Weather Index Insurance and Microcredit in Rural Areas: a Systematic Review” Environmental Research Letters, 17, 103002
3. Lu, Y., Li, Y., Li, W., and Lu Y. “When Embeddedness Turns to Disembeddedness: Rethinking the Relationship Between Human and Nature”
Grant Acknowledgements: National Science Foundation of China
Methods: Interviews and surveys with herds, local communitity leaders, bankers, and local government agencies. Statistical analysis, econometrics panel models, and dynamic stochastic general equilibrium models (DSGE) were employed.
Main Findings: (1) The difficulty for herders to obtain microcredit is reduced, and the repayment rates increase; the main use of microcredit is to buy hay; loan and repayment requirements do not align with the husbandry production cycle or consider the highly variable weather, and this misalignment forces pastoralists to borrow from usurers to repay bank loans. (2) Using microcredit to purchase hay increases loan-to-value ratio (LTV); borrowing from usurers to repay bank loans caused by the misalignment increases the loan amount of the next term and the liability-asset ratio; the high initial loan amount increases the risk of livelihood and livestock production for the next few years. (3) Using microcredit to purchase hay increases stocking rates; the high initial loan amount leads to high stocking rates for the next few years. (4) Microcredits provide funds to buy hay from outside communities, and decouple the feedback between forage yield and livestock numbers, increasing livestock numbers beyond the forage yield potential for the land. At the same time, using microcredit to buy hay can increase the cost of animal husbandry and reduce disposable cash, thus increasing livelihood risks. Vulnerable grasslands with low productivity are more sensitive to the changes of microcredit programs' policies; decreasing interest rates are more conducive to reducing payment burden and the recovery of vulnerable grasslands; excessively raising the credit line will exacerbate the degradation of vulnerable grasslands.
Products:
1. Lu, Y., Huntsinger, L. and Li, W. 2022. “Microcredit programs may increase risk to pastoralist livelihoods in Inner Mongolia”. Ambio, 51, 1063–1077.
2. Lu, Y., Yu L., Li, W., and Aleksandrova, M. 2022. “Impacts and Synergies of Weather Index Insurance and Microcredit in Rural Areas: a Systematic Review” Environmental Research Letters, 17, 103002
3. Lu, Y., Li, Y., Li, W., and Lu Y. “When Embeddedness Turns to Disembeddedness: Rethinking the Relationship Between Human and Nature”
Grant Acknowledgements: National Science Foundation of China
