Financial knowledge, formal credit constraints and farmers’ entrepreneurial choices based on a survey data in Ningxia, Shaanxi, and Shandong Provinces

Under the background of economic and social transformation and development, farmers’ entrepreneurship has become the consensus of the government and society. Farmers’ entrepreneurship is of great significance to promote farmers’ continuous income increase and to optimize the rural economic structure. Based on a survey data of 1 123 households in Ningxia, Shaanxi and Shandong provinces, and from the perspectives of financial knowledge and formal credit constraints, this paper empirically analyzed the impacts of financial knowledge on farmers’ entrepreneurial choices and the mediating effects of formal credit constraints on the relationship between financial knowledge and farmers’ entrepreneurial choices by the Probit model and the stepwise regression method. Results show that 59.9% of farmers choose to participate in entrepreneurship, indicating that most of farmers have certain entrepreneurial awareness and entrepreneurial motives to start their own business. But these factors, including the low level of financial knowledge, the cognitive bias on loans, the lack of effective collateral and guarantors, and the problem of highlighted financial exclusion, seriously hinder farmers from participating in entrepreneurial activities and cause the overall weakness of the entrepreneurial market. In addition, financial knowledge has a significant positive impact on farmers’ entrepreneurial choices, formal credit constraints have significant negative impacts, and formal credit constraints play a mediating role in the relationship between financial knowledge and farmers’ entrepreneurial choice behaviors. In summary, this paper provides the following policy recommendations: to increase the popularity of financial knowledge for farmers, to optimize the distribution of financial institutions, and to give a full play to the intermediary role of formal credit constraints.