Factors Influencing Access to Formal Credit by Pottery Households: Case Study in Bat Trang Village, Hanoi, Vietnam

Abstract

Purpose:This paper aims to investigate the factors influencing pottery households’ access to formal credit in a craft village in Hanoi city, Northern Vietnam. Methods: By using Yamande’s formula, sample size of 167 households was determined. Descriptive statistics and Probit regression model were applied in quantitative data analysis. Results: Diversification of rural livelihood through the development of non-farm activities is one of important policies for holistic rural development in Vietnam. However, non-farm households in general and pottery households in particular have faced with capital shortage in production process. One of reasons for their capital limitation is difficulties in formal credit access. This research indicated that households’ credit access was influenced by factors including age, educational level, collateral value asset, and return from ceramic production after tax. Practical implications: This study presented important roles of formal credit for economic development of rural households in general and pottery households in particular. However, most households meet difficulties in accessing to formal credit due to their old age, lack of collateral assets and low return from their production. Originality: This study implied that policy makers in Vietnam should implement a specific credit support for non-farm households in rural areas. In addition, commercial banks should loose credit requirements on collateral value assets in order to help rural non-farm households to access to formal credit, particularly banking loan.