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

Abstract

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.

Rural Credit Constraint and Informal Rural Credit Accessibility in China

“…These results imply that middle-aged households with large family size and which have borrowed from informal sources are more likely to be credit constrained from formal credit sources. This outcome is congruent with the findings of Baiyegunhi, Fraser [24], Chaudhuri and Cherical [66] and Xuan, Bauer [28], all of which showed a positive relationship between age and the probability of being credit constrained. Younger households are more likely to be granted credit because younger households are likely to be more active in obtaining information about credit sources, make use of modern farming technologies and take better advantage of market conditions [28].…”

“…Nonagricultural income has a significantly negative effect on credit constraint. This result reinforces the findings of previous studies such as Xuan, Bauer [28], Duong and Nghiem [71]. The variable "income" indicates, to a degree, the households' financial ability; households with higher incomes minimize repayment defaults [72].…”

“…However, the effect of age on the likelihood of credit constraints is ambiguous. Xuan, Bauer [28], for example, found that a one percent increase in the household-head's age decreases a rural household's probability of accessing formal credit by 0.154 percent. Perhaps it is assumed that younger households are more active in obtaining information about advances in farming technologies and credit sources and are thereby more likely to reduce potential constraints on borrowing.…”

“…This suggests that lenders tend to see younger borrowers as presenting less delinquency or default risk. The studies by Xuan, Bauer [28], Barslund and Tarp [29], Tran, Gan [32] found credit constraint had less or nearly no effect on older farmers. This appears to indicate that lenders think older farmers are more settled and less likely to take on new and capital demanding initiatives.…”

Determinants of credit constraints and its impact on the adoption of climate change adaptation strategies among rice farmers in South-West Nigeria

“…This implies that the probability of being quantity-constrained increases with farmers contact with extension agents. This result is unexpected and negates most findings that have reported a positive relationship between credit access and extension contacts with farmers (Omonona et al 2010;Luan et al 2016). A possible explanation is that credit-constrained farmers may not have sufficient capital to implement innovations disseminated by the extension agents (Amsalu and De Graaff 2007;Awunyo-Vitor et al 2014).…”