An Empirical Analysis on Interest Rate Elasticity of Demand about Rural Small Credit in China

It is thought that high interest rate should be carried out by small credit institutions to meet the demand of local farmers and maintain sustainable development. This paper analyses the interest rate elasticity of demand about small credit in the rural area in Guizhou. The result reveals that farmers are sensitive to the interest rate and the high interest rate is not possibly accepted by them. The view of high interest rate is only from the perspective of the small credit suppliers and the demanders are neglected. It is verified that increasing or decreasing artificially the interest rate is not rational. The interest rate should be determined by game between suppliers and demanders in the credit market. Understanding the influence of interest rate elasticity is the key to strengthen the service of small credit institutions.