Shifters of Participation in Micro Credit and Credit in General in Pakistan

Abstract

This study explores the determinants of participation in the credit market using Binary Logit Model on a total sample of 185 small scale traders including 85 borrowers and 100  non-borrowers in the third largest city of Pakistan “Faisalabad”. Two different models were estimated including one for the micro entrepreneurs and the other for both micro and small scale traders. Results indicate that higher Average Propensity to Consume is a major factor of entrance in the credit market. Family size and the level of education were also positively related with participation in credit market. However number of earners is negatively related with the probability of entrance in the credit market. H-L Statistics shows that model is good fit.

Key Words: Credit Participation, Micro Credit, Logit Model.