Bridging the credit gap for sustainable medicinal plant value chain development in Northwestern Vietnam

Abstract

Purpose The purpose of this paper is to explore the existence and determinants of the credit gap in the cinnamon value chain development in Northwestern Vietnam. Design/methodology/approach A multi-stage sampling of 548 cinnamon households and a Heckman Selection Model were applied to examine their credit access constraints. In-depth interviews with cooperatives, enterprises, banks and relevant government agencies were further conducted to explain the credit gap. Findings In the total 52.74 percent of households that received credit, 24.56 percent of them received an insufficient amount of credit as registered. In addition, 35.77 percent of total households are credit rationed. Although all enterprises and cooperatives had been successful in applying for credit as long as they have collateral, none of them received the full credit amount requested. The credit amount received satisfied 80.64, 43.03 and 44.28 percent of the demand by households, cooperatives and enterprises, respectively. The lack of valuable collateral assets is the most important factor explaining this credit gap. Moreover, membership in a farmer-based union or ownership of a bank account increases the probability of access to credit. Educated household heads with a larger farm size and the Kinh ethnic majority are positively associated with a larger amount of credit. Households with conventional cinnamon farming, more dependents and union non-membership are more likely to be credit rationed. Practical implications A reform on collateral management, facilitating access to bank accounts, capacity building for local farmer-based unions, organic certification, granting land use rights and facilitating a platform to share reliable information between relevant actors are needed to bridge the credit gap. Originality/value This paper analyses the determinants of credit access constraints by key actors in a medicinal plant value chain that was insufficiently discussed by previous studies in the field.

Achieving the United Nations' sustainable development goals through financial inclusion: A systematic literature review of access to finance across the globe

“…For Bolivia, Martínez et al (2019) find that a positive taste-based discrimination exists in credit lending for non-indigenous women compared with indigenous. Similarly, Luan (2019) finds that in Vietnam farmers from ethnic minorities are more likely to obtain smaller loans in comparison to Kinh ethnic majority.…”

“…Households with better education is found to be associated with greater use of formal finance in China (Fungáčová and Weill, 2015;Chen and Jin, 2017), UK (Deku et al, 2015), India (Karthick and Madheswaran, 2018;Barik and Sharma, 2019), Nigeria (Silong and Gadanakis, 2019), Germany, France, Italy, Spain (Nuzzo and Piermattei, 2019), MENAP 10 region (Shihadeh, 2018), and globally (Klapper and Singer, 2015). They are also found to be receiving more favourable terms when borrowing in P2P platforms and able to access to larger amount of formal credit (Luan, 2019). Only a handful of studies do not find a difference between less or more educated (Stegman and Faris, 2005;Majumdar, 2013;Xu et al, 2019) or financially literate (Lamb, 2016) households in accessing finance.…”

“…We find that results on the impact of age in accessing formal credit is mixed and inconclusive. A number of studies find that age does not matter in accessing formal credit (Bowles et al, 2011;Rao et al, 2015;Corrado and Corrado, 2015;Cozarenco and Szafarz, 2018;Xu et al, 2019;Brown et al, 2019;Luan, 2019;Silong and Gadanakis, 2019). Others report that younger adults are less likely to have formal credit (Deku et al, 2015;Klapper and Singer, 2015;Fungáčová and Weill, 2015;Chen and Jin, 2017;Kairiza et al, 2017;Shihadeh, 2018;Barik and Sharma, 2019).…”

“…Results, presented in Table 10, are inconclusive. A number of papers find that larger households are less likely to access formal finance in Canada (Simpson and Buckland, 2009;Islam and Simpson, 2017), UK (Deku et al, 2015), Vietnam (Luan, 2019), Bangladesh (Islam and Simpson, 2017), and China (Cull et al, 2018). Conflicting empirical evidence are provided for India (Karthick and Madheswaran, 2018), Zimbabwe (Kairiza et al, 2017), and Nigeria (Silong and Gadanakis, 2019).…”

Ethnic minorities’ access to mortgages in the UK: The undesirable impact of the Great Financial Crisis

“…A well-established literature documents the persistent financial exclusion of non-White households in the US (Benston and Horsky, 1992, Black et al, 1978, Munnell et al, 1996, Schafer and Ladd, 1981, Tootell, 1996. Recent studies also provide empirical evidence from other developed and developing countries that ethnic minorities are less likely to have access to credit and more likely to experience credit denials (Bowles et al, 2011, Charron-Chénier and Seamster, 2020, Gonzales Martinez et al, 2020, Luan, 2019, Simpson and Buckland, 2009, Stegman and Faris, 2005, Wyly et al, 2009. In the UK, ethnic minorities face inequality in a number of areas in society (Equality and Human Rights Commission, 2016), including financial services (Devlin, 2005, Finney and Kempson, 2009, Kempson and Whyley, 1999.…”