Rural credit and new technology adoption among family farms: evidence from two demonstration areas in China

This study examines the impact of formal and informal credit participation on the adoption of new technologies by family farms. Drawing on micro-survey data from two demonstration areas in China —Wuhan (Hubei Province) and Langxi (Anhui Province)—the analysis employs the propensity score matching (PSM) method for empirical identification. The results show that formal credit serves as a key driver of technology adoption. Specifically, formal credit is strongly associated with the uptake of capital-intensive, low-risk technologies, whereas informal credit is more relevant for the adoption of low-capital, high-risk technologies. Further analysis reveals significant heterogeneity in credit effects across farm sizes. Large farms, with greater collateral capacity, tend to access formal credit to invest in mechanization, whereas small farms rely more on short-term informal loans to meet liquidity needs. The structure of credit instruments also plays a critical role. Collateral-backed loans effectively support mechanization on large farms but may lead to credit misallocation for small farms. Short-term credit facilitates small-scale technology adoption by easing liquidity constraints. In contrast, the effects of long-term credit vary notably across regions. Overall, the findings highlight the complementary roles and structural differences of formal and informal finance in agricultural technology adoption. They offer theoretical insights for designing a tiered rural credit system and for developing differentiated financial support policies.