Abstract
This paper investigates the determinants of access to formal credit by
poor households in South Africa. Despite some progress in poverty reduction in
recent years, it remains astonishingly high by historical and international
standards. Access to credit is believed by some scholars (for example Mashego
2007) to be a primary means to address poverty and improve the standards of
living of poor households. Thus, it is necessary to identify the determinants of the
propensity to borrow and of the amount that is borrowed. Using 2008-2012 data
from the National Income Dynamics Study (NIDS), a Heckman Selection model
was estimated. The results from this study suggest that age of the household
head, race, educational level, gender, employment, geographic location of
households affect the propensity to borrow by poor households in South Africa.