Effects of social network on herder livestock production income and the mediation by fund loans

Abstract

Due to its alpine geography and harsh environment, the pastoral region of Qinghai Province is widely recognized as one of China’s concentrated and contiguous poverty-stricken regions, while climate change, market competition and grazing control exert further pressure on the income security of herders. After more than 1000 years of nomadic practice, cooperation and reciprocity have been entrenched in the culture of pastoral ethnic minorities, in which a well-developed social network may play a crucial role in herders’ social and economic activities, including their financial and production behaviors. Based on a questionnaire survey of 278 households in two counties of Qinghai, this study empirically examined the effects of herders’ social network on their livestock production income and the mediation function of fund loans therein. The social network was found to exert a significant positive impact on household income, and loans had a positive mediation effect. By comparison, the mediation effect of formal borrowing channels was statistically significant while that of informal channels was not, which may be attributed to the relative degree of maturity of the two disparate financial markets. It is suggested that a closer and more inclusive social network should be fostered, the quality of bank financial services should be improved, and the regulation on informal credit activities should be reinforced, so as to fully exploit the positive roles of the social network and fund loans for income growth of herder households in vast pastoral areas of China.