Impacts of Credit Access on Agricultural Production and Rural Household’s Welfares in Northern Mountains of Vietnam

Abstract

There is a great consensus on the positive impact of credit access on farmers' incomes and consumption, however, its effect on income inequality among different population segments is still a controversial issue. The paper aims to examine these concerns through using the mixed data collected from the sample of 193 households surveyed (demand-side) and in-depth interviewees with the key credit providers (supply-side) in Lao Cai, the sixth poorest province in Vietnam. At the grass root level, it is evident that better credit access not only significantly positive influences on the effectiveness of agricultural production, but also is the driving force for better structural transition within cultivation versus livestock. Besides this, it enhances both on-farm and off-farm income as well as the well-being of rural households. At the community-impact level, surprisingly, the financial development without agriculture-related supports causes to the negative effect on the distribution of agricultural outcomes and prolongs the inequality in the locality. In addition, an alarm regarding latent social issues has been generating from the preferential credit screen under the community-based lending method. Finally, policy implications are discussed to enhance the effectiveness and outreach of credit in the locality.

Agricultural infrastructure public financing towards rural poverty alleviation: evidence from West African Economic and Monetary Union (WAEMU) States

“…Stiglitz (1993) took an interest in the issue and found that access to credit could be an incentive for production. Several authors reach the same results (Reyes et al 2012;Lam et al 2019). In light of this literature, a positive sign of this variable is expected.…”

Access to Credit and Physical Capital Stock: A Study of Non-Farm Household Enterprises in Nigeria

“…These studies generally established that access to credit impacts positively and significantly on the performance of enterprises. Some studies (e.g., Lam et al, 2019;Jimi et al, 2019) found that access to credit is an important driver of agricultural productivity, while others (Ojonta and Ogbuabor, 2021;Nwosu et al, 2018) showed that credit access enhances labour allocation patterns, total factor productivity, technology adoption, and business efficiency.…”

“…Nagler and Naudé (2017) explained that, contrary to the expectations of the development economists of the 1960s and 70s, NHEs have continued to make increased contributions to household incomes and employment. Lam et al (2019) demonstrated that NHEs play a considerable employment role among rural households, thereby reducing rural-urban migration and income inequalities. Nwosu et al (2020) explained that NHEs supplement farm incomes, and thus reduce poverty among households.…”

“…It has been found that some factors, such as poor physical infrastructure, high transaction costs, lack of electricity, high energy costs, low level of education, and lack of access to communication facilities, especially in rural areas, militate against the efficient and effective functioning of NHEs in developing economies (see e.g., Kalla and Arora, 2011;Rahji and Fakayode, 2009;Lam et al, 2019;Jimi et al, 2019). One important factor that could also hamper the performance of NHEs in Nigeria is the lack of access to credit.…”

Improving Agricultural Value Chain Financing: A Case Study of Seng Cu Rice Chain in Lao Cai Province, Vietnam

“…Moreover, 64% of households borrowed from VBSP and 34% borrowed from VBARD. Under the rural credit market like the quasi-monopoly, the rural customers were restricted in the choice of formal financial services and could not do anything about the quality of services offered by the banks (Lam et al, 2019b). Indeed, our findings indicate that almost all chain participants had high financial demand; however, they face many obstacles to fulfill those demands.…”