Formal and informal rural credit in the Mekong River Delta of Vietnam: Interaction and accessibility |
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| Affiliation: | 1. School of Economics and Business Administration, Department of Finance and Banking, Can Tho University, Viet Nam;2. Faculty of Commerce, Department of Accounting, Economics and Finance, PO Box 84, Lincoln University, Canterbury, New Zealand;3. Faculty of Commerce, Department of Business Management, Law, and Marketing, PO Box 84, Lincoln University, Canterbury, New Zealand;1. Grupo de Análisis para el Desarrollo (GRADE), Av. Grau 915, Lima 4, Peru;2. Department of Economics, Stockholm School of Economics, Sveavagen 65, Stockholm 113 83, Sweden;1. CESSMA (IRD, INALCO, Université de Paris), Paris, France;2. French National Research Institute for Sustainable Development (IRD), France;3. French Institute of Pondicherry (IFP), India;4. LEDa-DIAL (IRD, CNRS and PSL Research University), France;1. Institute of Regional and Urban-Rural Development, Wuhan University, Wuhan, 430072, China;2. School of Economics, Shandong Normal University, Jinan, 250358, China;3. School of Economics and Management, Wuhan University, Wuhan, 430072, China;1. South Asia Office of the International Food Policy Research Institute (IFPRI), New Delhi, India;2. Arizona State University, USA |
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| Abstract: | This paper examines the factors influencing rural households’ access to credit in the Vietnamese market. Analysis confirms an interaction effect between informal and formal credit sectors in which informal credit positively influences accessibility to microcredit programs. Ignoring this interaction effect may lead to microcredit providers making loan decisions that are less than optimal. In the formal credit sector, the lowest income group faces more credit rationing than other groups, despite the fact that microcredit programs are designed to target households at the bottom of the income pyramid. Results demonstrate that land holding status, informal interest, and informal loan duration are important factors influencing access to informal credit. Factors influencing microcredit accessibility include local government employee status, credit group membership, a “poor” certificate, educational attainment, working skills and village road access. To reduce reliance on informal credit and improve microcredit accessibility, rural households should actively participate in a microcredit group. |
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