Formal and Informal Rural Credit in Four Provinces of Vietnam

Barslund, Mikkel; Tarp, Finn

doi:10.1080/00220380801980798

Cited by 190 publications

(231 citation statements)

References 15 publications

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“…Accordingly, preferential credit has been found to be inefficient in reducing poverty and improving agricultural growth. In another major study, Barslund and Tarp (2008) reported that a "one size fits all" method to scaling up preferential credit is not going to be the most advantageous. The expansion of preferential credit requires careful consideration for the need for credit in areas where access is presently low.…”

Section: Income Impact Of Different Credit Sources On Accessed Househmentioning

confidence: 99%

Income Impacts of Credit on Accessed Households in Rural Vietnam: Do Various Credit Sources Perform Differently?

Luan

Bauer

Kühl

2016

AOL

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This study uses the Propensity Score Matching to examine the income impact of different credit sources on accessed households in the Northern Mountains of Vietnam. Results show that overall rural credit serves an important role in improving household income with respect to total income, per capita income and nonfarm income. However, different credit affects recipients heterogeneously. Whereas a significant increase in household income can be achieved through accessing commercial and informal loans, there is no significant increase of all income components associated recipients of preferential credit. These results imply that a successful credit scheme needs to consider variations in transaction costs, disbursement scheme, loan characteristics and typical socio-economic conditions of credit recipients.

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Section: Income Impact Of Different Credit Sources On Accessed Househmentioning

confidence: 99%

Income Impacts of Credit on Accessed Households in Rural Vietnam: Do Various Credit Sources Perform Differently?

Luan

Bauer

Kühl

2016

AOL

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“…Many researches find that credit may relax financial constraint via providing the poor with a source of capital for production or business activities. Evidence from empirical studies documents that credit significantly increases income of the poor households (Morduch and Haley, 2001;Barslund and Tarp, 2008). However, some studies argue that rural credit does not have the effect on income improvement in short term (Takahashi et al, 2010).…”

Section: Introductionmentioning

confidence: 99%

“…These two banks aim at agriculture and rural development and poverty reduction. Formal credit is essential for agricultural development because it not only gives solution to the failures of rural financial markets, but also is an important factor in promoting production and generating income (Atieno, 1997;Barslund and Tarp, 2008).…”

Section: Literature Reviewmentioning

confidence: 99%

Formal Credit and its Impact on Income - Evidence from the Poor Households in Vietnam

Hieu¹,

Thanh²

2017

American Journal of Applied Sciences

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The poor households are normally financial constrained, which inhibits them from income-generating activities. Formal credit market in Vietnam has been more and more improved and thus the poor households can be more accessible to formal sources. Thenceforth, they can relax their financial constraint and then invest in on-farm or off-farm activities to generate income and escape poverty in longer run. This research is aimed at examining the impact of formal credit on income of the poor households in rural Tra Vinh, one of the poorest provinces in Vietnam. The research applies the data from a survey of 381 rural poor and Propensity Score Matching (PSM) method for quantitative analysis. The estimated results find that formal credit borrowers benefit from self-employment activity rather than other income-generating activities. In particular, borrowers from formal sources have significantly higher self-employment income than nonborrowers, but there is no significantly different among them in terms of income from agriculture and wage sources.

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“…Nghiem et al (2012), using a quasi-experimental study on households of microfinance programs by NGOs, however find that there is no significant impact of participation on household welfare proxied by income and consumption per adult equivalent. Other papers focus on the demand for credit or credit rationing, such as Pham and Izumida (2002) and on the use of credit such as Barsland and Tarp (2008) who find that formal credit is used mostly for production and asset accumulation while formal credit is for consumption smoothing.…”

Section: Introductionmentioning

confidence: 99%

Does access to finance improve household welfare?

Quach¹

2016

Investment Management and Financial Innovations

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The positive relationship between access to credit and household welfare has been well explored and documented in the literature. The literature however sees just few research papers about Vietnam. One issue with most research papers in this area however is that while the conclusions are consistent, they mostly draw their findings from the analysis of cross-section data obtained from household surveys. Such an analysis represents a snapshot view and does not tell us much about the long-term impact of access to credit on household welfare. In this paper, we develop an econometric framework to test the impact of access to credit on household welfare in the long-run using data from two household surveys in Vietnam. The first survey covers a sample of 4,799 households, 150 communes and 300 villages over the country. The second survey, taken after 5 years, covers a sample of 5,999 households, 194 communes and 388 villages, including all households surveyed in the first survey. Our econometric framework considers and controls for the effect of endogenous credit and of the sample selection bias. We employ a three stage regression: the first stage controls for the sample selection bias; the second stage controls for the endogeneity of credit; and the third stage is to estimate the impact of access to credit on household welfare, where the inverse Mill's ratios and the predicted residuals, which are computed from the first and second stages, are included as explanatory variables. We find that access to credit has a positive and significant longterm impact on household welfare in terms of per capita expenditure, per capita food expenditure and per capita non-food expenditure. We also find that although both formal and informal credit contribute to household welfare, formal credit has a relatively higher impact than its informal counterpart. Our findings imply some policy recommendations. On the one hand, the findings encourage policies that improve the access to credit for poor households in rural areas. On the other hand, the low level of impact suggests that the subsidized credit should be reconsidered.JEL Classifications: Q14, O16, and O18

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Formal and Informal Rural Credit in Four Provinces of Vietnam

Cited by 190 publications

References 15 publications

Income Impacts of Credit on Accessed Households in Rural Vietnam: Do Various Credit Sources Perform Differently?

Income Impacts of Credit on Accessed Households in Rural Vietnam: Do Various Credit Sources Perform Differently?

Formal Credit and its Impact on Income - Evidence from the Poor Households in Vietnam

Does access to finance improve household welfare?

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