Microfinance, self-employment, and entrepreneurs in less developed areas of rural China

China is experiencing a transformation, as vast numbers of rural laborers move toward off-farm employment. In such a transformation, the role of credit is unclear. The overall goal of this study is to examine the impact of access to credit by rural households on employment decision-making by rural laborers in China. Based on longitudinal data concerning 1992 rural households in China, this study finds that the use of credit is immense in rural China. Among different types of credit, access to microfinance significantly increased farmersʹ time working on self-employment activities, especially for the poor households. Credit from formal financial institutions and informal networks had no such effect.