Farmland management rights (FMR) mortgage lending has been advanced as a central instrument of rural credit reform in China, yet the program has consistently failed to sustain itself in the absence of direct government facilitation. Drawing on five national and provincial pilot counties in Henan Province, this study investigates the structural factors underlying this sustainability failure. We employ a sequential mixed-methods design: grounded theory analysis of in-depth interviews, policy documents, and media reports from five focal sites to inductively construct a constraint framework, followed by structural equation modeling (SEM) validation using 1055 survey responses. Our grounded theory analysis identifies three internal constraint categories—property rights insecurity, a thin secondary land market, and subject-level agricultural risk—and one external environmental constraint, which together produce a state of mutual non-recognition: neither financial institutions nor farming households regard FMR as legitimate collateral. Notably, the effect of collateral acceptance on farmer mortgage willingness is statistically insignificant, revealing that demand-side barriers are more deeply entrenched than supply-side institutional improvements alone can resolve. These findings challenge the premise that legal formalization of land rights is sufficient to generate market-driven credit activity, and call attention to the equally important role of institutional ecosystem development—encompassing land markets, appraisal capacity, supervisory infrastructure, and rural credit culture. The insights carry direct relevance for developing economies exploring land-backed agricultural credit as a rural finance strategy.
Wu et al. (Thu,) studied this question.