The poor are able to improve their livelihood if they have access to financial resources such as credit. However, the poor in rural Vietnam see the capital shortage as a major constraint to investment. This study uses the data of 1338 rural households in the Northern Mountainous Region of Vietnam to examine the extent to which rural credit targets the poor, as well as credit access constraints and impacts. This study uses Principal Component Analysis (PCA) to measure the relative poverty index for each individual household to evaluate the poverty outreach of credit. Based on the poverty index, the share of credit-accessed households is compared with that of credit non-accessed ones to examine the poverty targeting of credit. Moreover, this study relies on the Bayesian Model Average applied to the Heckman Selection Model to examine factors influencing credit access. Advantages of those approaches are that they avoid the problem of bias selection and model uncertainty. The income impact of credit on accessed households was estimated by calculating the average treatment effect on treated (ATT) using different matching algorithms. In addition, to increase the reliability of estimation measures, the distribution for the impact estimator is further constructed by applying the bootstrapping approach to the Propensity Score Matching (PSM).
Results showed that subsidised credit successfully targeted the poor and ethnic minority households. These results indicate that governmental subsidies are necessary to reach the poor and low income households, who need capital but are normally bypassed by commercial banks. Provision of credit to rural households has increased their total income, per capita income and nonfarm income. It is apparent from this study that overall rural credit has contributed to the remarkable achievement in poverty reduction of Vietnam over the last two decades. However, various types of credit affected recipients differently. Strong evidence of positive impact was found when households received commercial credit from the Agribank. In addition, informal credit is an important component in the credit system and plays a role in improving household income. However, the income impact of subsidised credit was limited in its magnitude. Although the subsidised credit is insufficient to significantly improve the income of poor households, it prevents these households from becoming even poorer.
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Farming and Rural Systems Economics, Vol. 156ISSN 1616-98082015; XVI+224pp.; 21 x 14,8 cm; paper
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