(Luận văn) determinants of accessibility to microcredit in term of formal sector and informal sector

UNIVERSITY OF ECONOMICS, HO CHI MINH CITY t to VIET NAM – NETHERLANDS PROGRAMME FOR M.A PROGRAM IN ng DEVELOPMENT ECONOMICS hi ep w n lo ad ju y th yi pl n ua al n va fu ll DETERMINANTS OF ACCESSIBILITY TO oi m at nh MICROCREDIT IN TERMS OF z FORMAL SECTOR AND INFORMAL SECTOR z ht vb k n n va DR CAO HAO THI a Lu Academic Supervisor: om l.c gm TRAN THI NGOC ANH MAI jm o0o - y te re Dec – 2014 ABSTRACT t to Microcredit is an emerging concept helping the poor out of poverty situation This ng dissertation attempts to investigate the determinants affecting the probability of hi ep participation in different types of credit sectors in terms of formal sector and informal sector Using a sample size of 1,522 households participate in credit w n market from The Vietnam Access to Resources Household Survey (VARHS) 2012, lo ad bivariate probit model is employed to explore the determinants of household credit y th demand due to the binary nature of the dependent variables Various explanatory ju variables include age, gender, marital_stt, edu, hhsize, income, savingamount, yi pl landsize, agriculture_act, network and location that influence probability of ua al accessibility to different sectors of credit Furthermore, relationship between n dependent variables is accounted in this research Results reveal that factors va n affecting formal credit participation are different from factors affecting informal fu ll credit participation Additionally, the result indicates that there is negative oi m correlation across two sectors of credit at nh z z ht vb k jm om l.c gm n a Lu n va y te re ACKNOWLEDGEMENT t to ng I would like to express my deepest thankfulness to my advisor, Dr Cao Hao Thi hi ep who spent lots of his precious time to support and guide me throughout this research and continuously led me to the right way w n I would also like to extend my appreciation to the teachers working on Vietnam lo ad Netherlands programme who gave great lectures and invaluable knowledge for us ju y th to complete the course yi I am grateful to my parents and my siblings that always encourage and support me pl in my study and in every aspect of life ua al I also want to express my gratitude to my friends for sharing with me the n n va difficulties and giving me the ideas, knowledge and materials for the study and for ll fu all the time we were at Master in Development Economics 19 oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re LIST OF FIGURES t to Figure 2.1 Probability of success and expected returns to borrowers ng Figure 2.2 Return to the bank 11 hi ep Figure 3.1 Microfinance Systems in Vietnam 22 Figure 4.1 Process of research 30 w n Figure 4.2 Participation in credit sector 33 lo ad LIST OF TABLES ju y th Table 2.1 Definition of Variables 18 yi pl Table 3.1 Microfinance Institutions in Vietnam 20 al n ua Table 3.2 Comparison between formal and informal lenders 28 va Table 4.1 Summary of Participation in different credit sectors 32 n Table 4.2 Conditional and Unconditional Credit Participation Probabilities 33 fu ll Table 4.3 Summary statistics 34 m oi Table 5.1 Determinants of accessibility to formal and informal credit sector 38 nh at Table 5.2 Marginal effects for conditional probability of formal sector participation 44 z z ht vb Table 5.3 Marginal effects for conditional probability of informal sector participation 46 k jm om l.c gm n a Lu n va y te re TABLE OF CONTENTS CHAPTER 1: INTRODUCTION t to ng 1.1 Problem statement hi 1.2 Research objective ep 1.3 Research questions w 1.4 Research Structure n CHAPTER 2: LITERATURE REVIEW lo ad 2.1 Concept of credit y th 2.2 Theory of demand for credit ju 2.3 Credit rationing theory yi pl 2.4 Determinants of participation in microcredit programs 11 al ua CHAPTER 3: OVERVIEW OF MICROFINANCE SYSTEM 19 n The history of Microfinance 19 va n 3.2 The role of government in microfinance: 21 fu ll 3.3 Overview of credit market in Vietnam 22 m oi 3.3.1 The formal credit market 23 at nh 3.3.2 The semi-formal credit market: 26 3.3.3 The informal credit market 26 z z CHAPTER 4: RESEARCH METHODOLOGY 30 vb ht 4.1 Research process 30 jm 4.2 The data 31 k gm 4.3 Data Analysis Method 35 l.c CHAPTER 5: RESULTS AND DISCUSSION 38 om 5.1 Estimation of determinants of microcredit participation 38 a Lu 5.2 Estimation of conditional marginal effects 44 CHAPTER 6: CONCLUSION 48 n APPENDIX 57 y REFERENCES 52 te re 6.3 Limitations 50 n 6.2 Policy implications 49 va 6.1 Research Findings 48 CHAPTER 1: INTRODUCTION t to 1.1 Problem statement ng hi ep There are about 1.22 billion people (21 percent of population) in the world living on less than $1.25 a day in 2010 (World Bank) Focusing towards poverty reduction w and finding ways to improve living condition have taken a lot of attention of public n lo policies in the world The rate of poverty in Vietnam decreases remarkably in recent ad y th years According to annual report shown by GSO, the poverty rate declined from ju 15.5 percent in 2006, to 13.4 percent in 2008, to 10.7 percent in 2010 In a report of yi GSO in 2010, it also revealed that poverty level in rural area (13.2 percent) is much pl ua al higher compared to that in urban area (5.1 percent) How to distribute the benefits n of economics growth, especially to rural area is one of the challenges remained ll fu between rural and urban area n va Therefore, rural economy deserves more attention and support to reduce inequality m oi According to McCarty (2001) and Pham & Lensink (2002), lack of ability to obtain nh the fund for the purpose of working capital and investment is one of the reasons at z among other things that lead to poverty in developing countries Providing a z ht vb channel to ease the credit constraints for the poor rural household is the primary k jm object in poverty alleviation strategy of developing countries, including Vietnam gm Farmers need an instrument such as credit to enhance productivity and promote l.c standard of standard of living because of their seasonal activities and uncertainty om they are facing (Ololade & Ologunju, 2013) Accessing to microcredit is recognized a Lu as a potentially effective tool out of under poverty line situation and improve living n standards (ADB, 2000a; Morduch and Haley, 2002; Khandker, 2003) Agricultural n va credit plays an important role in sustainable achievement in any country in the Mohammad Yunus who pioneered the principle of microfinance and microcredit y countries, and its role was further attended with rapid growth worldwide when te re world Microfinance industry has been known in many decades in developing received Nobel Peace prize in 2006 (Tra Pham and Robert Lensink, 2007) And a variety of previous researches demonstrated the position of microfinance in poverty t to reduction by focusing on the effect on household welfare The demand for rural ng hi credit has increased sharply due to the decollectivization of agriculture launched in ep Vietnam in the year 1986 Hence, the spread of microfinance with amendment of regulations on banking operation in Vietnam plays an important component in w n fighting again poverty over the last decades Vietnam has introduced several of lo ad microcredit programs via a lot of channels such as banks, credit funds, money y th lenders and advance input providers to supply credit for a variety of clients ju yi pl Despite the importance of credit to the poor, the poor family that lacks ability to ua al access to adequate financial service leads to the fact that they not have prospects n for increasing their productivity and living standard And the fact that commercial va banks have no interest in allocating credit to the poor because of their lack of viable n ll fu collateral Because of these reasons, governments in developing countries have set oi m up credit programs that aim at improving the process of rural household access to at nh formal credit during the past four decades (Diagne, 1999) However, the lending mechanisms as well as the nature of the credit market which are highly regulated by z z government intervention such as controls of interest rates and credit quota allocation vb ht not function well jm k Similarly, Robinson (2001) and Gonzalez Vega (2003) also indicated that most of gm microfinance institutions have been not sustainable in developing countries Credit om l.c subsidized interest rate provided by “Agricultural development banks” which established by commercial banks to extend credit to rural household not considered a Lu creditworthy However, majority of these credit programs have failed to reach their n the most problematic features facing by lenders and borrowers (Pham & Lensinnk, y Risk management and transaction costs associated with Asymmetric information are te re and von Pischke 1984; Adams and Vogel 1986; Braverman and Guasch 1986) n va targets both to be sustainable credit providers and serve the poor (Adams, Graham, 2007) It is also well know that different forms of credit market serve different group of borrowers, it is difficult for large number of poor households to access to t to credit sources Households often face limited access to credit because of rationing ng hi of credit demand that leads to the poor and low income households are ep generally excluded from the formal credit sector (Stiglitz & Weiss, 1981) In fact that formal provider, semi-formal provider and informal provider exist side by side w n in Vietnamese financial market To deal the level of information asymmetry lo ad between borrowers and different lenders, many government microcredit programs y th are accompanied by the local Peoples Committees in terms of lending process to ju yi assist microcredit market operation pl ua al In respect of this, narrowing gaps in term of whom it serves and the service it n provides, improving the efficiency and effectiveness of microfinance system is the va main challenge of policy makers as well as program organizers n fu ll With data collected from The Vietnam Access to Resources Household Survey m oi 2012 (VARHS) which supplements and extends the VHLSS (Vietnam household nh at Living Standards Survey) by repeating surveys of the same household with data z from VHLSS and asking more questions about income, expenses, land, agriculture, z ht vb asset, investment, migration, climate change, social welfare and so on; VARHS jm received assistance from University of Copenhagen, CIEM, ILSSA (Institute For k Labor Science and Social Affair), and IPSARD (Institute of Policy and Strategy for gm l.c Agricultural and Rural Development), econometrics techniques are employed in this research to explore the factors that affect access to credit in terms of formal credit om and informal credit a Lu n 1.2 Research objective y te re influence on the probability of household accessing to different types of credit n va The objective of this thesis is to empirically investigate the determinants that sectors as well as the relationship between formal credit participation and informal credit participation at the same time t to ng Additionally, marginal effects of each independent variable on the choice of credit hi ep source are also shown in this research w 1.3 Research questions n lo ad This research is to answer two central questions: y th ju What are determinants affecting the probability of household accessing to different yi types of credit sector? pl al ua Is there any evidence of a correlation between participating in formal credit and n participating in informal credit at the same time? n va ll fu 1.4 Research Structure m oi This dissertation is organized as follows In chapter one, problem statement and nh at objectives of this research are presented Chapter two provides concepts related to z this research, discusses theory for demand credit and credit rationing theory and z ht vb introduces explanatory variables Chapter three presents the history of microfinance jm as well as the role of government in microfinance It also provides insight into the k structure of credit market in Vietnam Chapter four presents research structure, data gm l.c description and methodology method used in this research Chapter five gives empirical models and the estimated results Finally, conclusion, policy suggestions om and limitations are highlighted in chapter six n a Lu n va y te re CHAPTER 2: LITERATURE REVIEW t to This chapter presents the overview of theory and discusses previous studies relate to ng the research topic The first part mentions about microcredit regarding concept of hi ep credit The second part discusses about theory for demand credit and credit rationing theory The last part discusses about the determinants affecting credit w n accessibility lo ad 2.1 Concept of credit ju y th yi There are several and various definitions regarding the word credit as follows: pl ua al Credits are referred as loans which permit consuming in the present, in exchange for n an agreement to make repayment at sometimes in the future (Pischie et al., 1983) va n Obtaining credit was considered as the process of controlling over the use of money, fu ll goods and services based upon a promise to repay at a future day (Adegeye & oi m Dittoh, 1985) at nh Ololade & Ologunju (2013) defined credit as a mean for temporary transfer of z z assets to individuals or organizations that has not them from individuals or vb ht organizations that has This process required evidences of debt obligation in return jm for a loan, in the case of transaction between friends or relative which based on k l.c gm good relationship excluded Microcredit which is a component of microfinance provides small loan to the poor om for self –employment That generates income, helping them care for themselves and n a Lu their family (The Microcredit Summit, 1997) of India- Master Circular, 2011) y services and products of every small amount to the rural household (Reserve Bank te re are considered as targets of microcredit by providing of thrift, credit, other financial n va To raise income level and improve living standard of semi-urban and urban areas CHAPTER 6: CONCLUSION t to Chapter six presents findings of this research, policy recommendations as well as ng limitations of the research hi ep 6.1 Research Findings w n Households apply for the loan, but some of them are not included because of lo ad accountability to repay loan and insufficient collateral These borrowers turn to y th informal credit sector as an alternative source of capital at much higher interest rate ju yi compared to that form informal credit sector pl ua al As known, formal credit provider exists in parallel with the informal credit provider but not many researches include both in their investigation Almost of them n n va investigate the determinants of household’s participation in credit sector in terms of ll fu formal sector or informal sector separately; therefore, they failed to account for the oi m relationship between two types of credit sector This research differs from most formal credit using and informal credit using at nh previous findings; it attempt to find out the relationship between the choice of z z vb This research employs bivariate probit model to exam the factors influencing ht household accessibility to formal credit sector and informal credit sector as well as jm k relationship between two of them is investigated The results show that the gm determinants of the use of formal credit sector are different from the determinants of om l.c the use of informal credit sector Furthermore, the probability of formal sector participation will be decreased if there is an existence of informal credit sector a Lu participation and vice versa n better off with collateral requirement such as land size or saving amount 48 y estimation indicates that formal lender tend to provide credit to household who are te re savingamount, landsize and location affect the formal credit participation The n va Bases on estimated results, seven determinants namely age, edu, hhsize, income, 6.2 Policy implications t to Based on the research results, in order to improve the smooth of microfinance ng system operation, some policies are suggested: hi ep Firstly, network of commercial bank should be expanded at village level w Additionally, administrative process for lending should be more simplified n lo Accessing credit source is necessary for the poor improving living standard ad Providing credit from formal sector for the poor is very important However, it is y th very difficult for the poor living in Vietnamese rural areas to approach credit ju yi provided by formal institutions Therefore, developing a banking system in rural pl areas to reduce the gap between the poor and the bank is crucial issue Additionally, al n ua simplifying administrative process to help the poor borrowing money promptly and n va timely is necessary As research result indicated, education level is statistically ll fu significant factor of formal credit sector; therefore, complicated process leads to education oi m imperfects in choosing credit source of poor household which have low level of at nh Secondly, criteria for lending assessment process should reflect the primary target z z of microfinance system, not depend on the confidence the lender has Credit vb ht providers should base on household’s characteristics demonstrating that household jm is the poor instead of depending on collateral such as saving amount or the size of k gm the land that household has Actually, household with large saving amount or land l.c size have more capital and have means for livelihood compared to household not om have that a Lu Thirdly, implementing interest rate policies in rural areas which are in accordance n preferential interest rates However, preferential interest rates lead to consequences y te re VBSP acts as the loan provider delivering Government fund to the poor at n va with market capitalism gradually abandon preferential interest rates Recently, which are different from primary targets of the fund establishment Firstly, it is 49 difficult for the poor to get loan because credit officers face high default risk when they loan for the poor In this case, banks usually have incentive to lend out the fund t to for the households which have collaterals such as saving amount or landsize ng hi because of two sides benefits Secondly, low interest rate lead to use credit in ep inefficient way Interest rate reflects cost of capital as well as adverse selection reduction Capital will be invested in bad project if the cost of capital is low w n lo Fourthly, developing an appropriate management system to manage informal credit ad y th source is to promote the positive role of this sector in poverty reduction in rural ju areas Actually, loans from informal sector represent a significant share in the credit yi and play important role in the life of the poor; therefore, improving the operation of pl ua al informal credit sector should be encouraged However, informal credit sector n provides loan at sky-high interest rate; especially, in remote area where formal va credit source is shortage Therefore, the operation of formal credit sector should be n ll fu controlled partially to reduce the danger of putting the poor into cycle of poverty oi m 6.3 Limitations at nh z The number of households which participate in semi-formal credit in sample z vb collected is small, so this research cannot examine the relationship between the ht choice of semi-formal credit sector and that of formal credit sector as well as that of jm informal credit sector k gm Secondly, one of the most significant determinants of household credit demand is om l.c the distance from borrower’s location to lender which household borrows from (Ho, 2004; Vaessen, 2000; Zeller & Sharma, 2000) However, this information is not a Lu available; information about distance from the borrower’s house to the nearest n y participation in this case te re distance from household’s location to credit providers affects microcredit n va credit institution available only Therefore, this research cannot investigate if 50 Moreover, the literature shows that determinants of credit participation come from demand side characteristics and supply side characteristic (Vaessen, 2002; Duong t to Pham, 2002) However, in this research, I focus on demand side presented by ng hi characteristics of household only ep These limitations mentioned are suggested for further research w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 51 REFERENCES t to ng hi ep Abdul-Muhmin, Alhassan G, & Umar, Yakubu A (2007) Credit card ownership and usage behaviour in Saudi Arabia: The impact of demographics and attitudes towards debt w n Adams, Dale, Graham, Douglas , & J.D Von Pischke (1984) Undermining Rural Development with Cheap Credit lo ad y th ju Adegeye, A.J, & Dittoh, J.S (1985) Essentials of Agricultural Economics Impact Publishers Economics Nigeria,Limited, Ibadan yi pl Ambrose, B., LarCour-Little, M., & Sanders, A (2004) The effect of conforming loan status on mortgage yield spreads: a loan level analysis ua al n Anjugam M, & C Ramasamy (2007) Determinants of Women’s participation in Self- Help Group led micro finance programme in Tamil Nadu n va fu ll Balogun, O., & Yusuf, S (2011) Determinants of Demand for Microcredit among the Rural Households in South-Western States , Nigeria oi m nh at Bendig, M, Giesbert, L, & Steiner, S (2009) Savings, Credit and Insurance: Household Demand for Formal Financial Services in Rural Ghana z z ht vb Bendig, M G., & Susan, S (n.d.) Transformation in the Process of Globalisation Savings , Credit and Insurance : Household Demand for Formal Financial Services in Rural Ghana k jm om l.c gm Braverman, A, & JL Guasch (1986) Rural Credit Markets and Institutions in Developing Countries: Lessons for Policy Analysis from Practice and Modern Theory n a Lu Bridges, S, & Disney R (2004) Use of credit and arrears on debt among lowincome families in the United Kingdom n va Chen, A, & Jensen H (1985) Home equity use and the life cycle hypothesis y 52 te re Del-Rio, A., & Young, G (2005) The determinants of unsecured borrowing: evidence from the British household panel survey Doan, T., Gibson, J., & Holmes, M (2010) What determines credit participation and credit Constraint of the Poor in Per-urban area, Vietnam t to ng Duca, J., & Rosenthal, S (1994) Do mortgage rates vary based on household default characteristics? Evidence on rate sorting and credit rationing hi ep Duong, P., & Izumida, Y (2002) Rural development finance in Vietnam: A microeconometric analysis of household surveys w n Ferede, K H (2012) Determinants of Rural Households Demand for and Access to Credit in Microfinance Institutions The Case of Alamata Woreda- Ethiopia lo ad y th George, O (n.d.) ju yi Gonzalez-Vega, C., Meyer, R L., Schreiner, M., & Navajas, S (2003) Microcredit and the Poorest of the Poor:Theory and Evidence from Bolivia pl al n ua Grootaert, C (1999) Social capital, household welfare, and poverty in Indonesia n va Hall, R (1978) Permanent Income ll fu Hao, Q M (2005) Access to finance and poverty reduction an application to rural Vietnam oi m at nh Izumida, Y., & Pham, B D (2002) Rural development finance in Vietnam: A microeconometric analysis of household surveys z z Jappelli, T., & Pistaferri, L (2007) Do people respond to tax incentives? An analysis of the Italian reform of the deductibility of home mortgage interest ht vb jm k Jonathan Morduch , & Barbara Haley (2002) Analysis of the Effects of Microfinance on Poverty Reduction gm om l.c Kamleitner, B., & Kirchler, E (2007) Consumer credit use: a process model and literature review n a Lu Khandker, R S (1998) Fighting Poverty with Microcredit: Experience in Bangladesh, New York y te re 53 n Khandker, R S (2003) Microfinance and Poverty: Evidence Using Panel Data from Bangladesh va Khandker, R S (2001) Does Micro-finance Really Benefit the Poor? 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The Economics of Microfinance z vb ht Morduch, J., & Haley, B (2002) Analysis of the Effects of Microfinance on Poverty Reduction jm k Mpuga, P (2004) Demand for Credit in Rural Uganda : Who Cares for the Peasants  l.c gm om Mpuga, P (2008) Constraints in Access to and Demand for Rural Credit : Evidence from Uganda n va y te re Nguyen, C V (2011) The impact of Informal Credit on Poverty and Inequality: The Case of Vietnam n a Lu Nguyen, C H (2006) Determinants of credit participation and its Impact on household consumption: Evidence From Rural Vietnam 54 Nwaru, J C, Essien, U A, & Onuoha, R E (2011) Determinants of informal credit demand and supply among food crop farmers in AkwaIbom state, Nigeria t to ng Okten, C, & Osili, U O (2003) Contributions in heterogeneous communities: evidence from Indonesia hi ep Okunade, E O (2007) Accessibility of agricultural credit and inputs to women farmers of Isoya Rural development project w n Okurut, F N (2006) Access to credit by the poor in South Africa: Evidence from Household Survey Data 1995 and 2000 lo ad y th ju Ololade R.A., & Olagunju F.I (2013) Determinants of Access to Credit among Rural Farmers in Oyo yi pl Owuor George (2001) Is Micro-Finance Achieving Its Goal Among Smallholder Farmers in Africa? Empirical Evidence from Kenya Using Propensity Score Matching n ua al va n Pham, T T., & Lensink, R (2007) Household borrowing in Vietnam: A comparative study of default risks of informal, formal and semi-formal credit ll fu oi m at nh Phan, K D (2012) An Empirical Analysis of Accessibility and Impact of Microcredit: the Rural Credit Market in the Mekong River Delta, Vietnam z z Robinson, M S (2001) The Microfinance Revolution vb ht Schreiner, M, & G Nagarajan (1998) Predicting Creditworthiness with Publicly Observable Characteristics: Evidence from ASCRAs and RoSCAs in the Gambia k jm gm om l.c Soman, D., & Cheema A (2002) The effect of credit on spending decisions: The role of the credit limit and credibility n a Lu Stiglitz, J E., & Weiss, A (1981) Credit rationing in markets with imperfect information y te re 55 n Vaessen, J (2001) Accessibility of rural credit in Northern Nicaragua: the importance of networks of information and recommendation va Tang, S., Guan, Z., & Zin, S (2010) Formal and Informal Credit Markets and Rural Credit Demand in China Yehuala, S (2008) Determinants of smallholder farmers access to formal credit: the case of Metema Woreda, north Gondar, Ethiopia t to ng hi ep Zeller, D A., & Sharma, M (2000) to Credit Empirical Mesearements of Households’ Access and Credit Constraints in Developing Countries:Methodological Issues and Evidence w Zeller, M (1994) Determinants Of Credit Rationing - A Study of Informal Lenders And Formal Credit Groups In Madagascar n lo ad Zhao, X., & N.Harris, M (2004) Demand for Marijuana, Alcohol and Tobacco:Participation, Levels of Consumption and Cross-equation Correlations ju y th yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re 56 APPENDIX t to Appendix 1: Statistics variables ng hi summarize ep Obs Mean hhsize age material edu gender 1522 1522 1522 1522 1522 5.754928 47.13272 8554534 8.339685 8390276 location formal semi_formal informal network 1522 1522 1522 1522 1522 Variable w n lo ad ju y th yi pl Min Max 3.423013 12.3758 3517587 3.226634 3676263 18 25 93 13 7943495 6760841 0854139 4638633 5611038 404309 4681222 2795885 4988563 4964154 0 0 1 1 8554534 6708279 88.22605 10.99167 22.41842 3517587 470067 157.5349 16.30339 58.27375 0 2.005 035 1 4500 181.2 820 n va ll fu oi m 1522 1522 1522 1522 1522 n ua al marital_stt agricultur~s income landsize savingamount Std Dev at nh z z ht vb k jm om l.c gm n a Lu n va y te re 57 Appendix 2: Biprobit model result Seemingly unrelated bivariate probit t to Number of obs Wald chi2(22) Prob > chi2 Log likelihood = -1626.0435 = = = 1522 244.13 0.0000 ng hi Coef Std Err z P>|z| [95% Conf Interval] ep formal w age gender marital_stt edu hhsize income savingamount landsize agriculture_activities network location _cons n lo ad ju y th yi pl -.012557 -.2400197 4704264 0063396 -.0544963 0006474 -.0022606 -.0024476 -.0047116 1535791 -.33206 744359 n ua n va 0030486 1284223 1387999 0110286 0107979 0002655 0009093 0025141 0783177 0745282 082791 2348165 2.46 1.18 0.49 2.62 1.72 -3.03 2.85 3.03 0.70 -0.60 10.37 -4.95 0.014 0.237 0.624 0.009 0.086 0.002 0.004 0.002 0.481 0.547 0.000 0.000 0015367 -.0997061 -.2039696 0073209 -.0026207 -.001324 0008136 0026931 -.0983599 -.1910049 6960802 -1.622038 0134869 4037001 340116 0505521 0397064 -.0002834 0043779 0125483 2086397 1011402 1.020615 -.7015737 0029225 1285607 1384631 0105358 0104913 0002615 0007772 0022311 0754129 071354 0821836 2261336 -4.30 -1.87 3.40 0.60 -5.19 2.48 -2.91 -1.10 -0.06 2.15 -4.04 3.29 0.000 0.062 0.001 0.547 0.000 0.013 0.004 0.273 0.950 0.031 0.000 0.001 -.018285 -.4919939 1990436 -.0143102 -.0750589 0001349 -.0037839 -.0068204 -.1525181 0137279 -.493137 3011452 -.0068289 0119546 7418092 0269893 -.0339337 0011599 -.0007373 0019252 1430949 2934304 -.1709831 1.187573 -18.48 0.000 -1.257954 -1.01665 -.850499 -.7684985 ll fu oi m at nh age gender marital_stt edu hhsize income savingamount landsize agriculture_activities network location _cons al informal 0075118 151997 0680732 0289365 0185429 -.0008037 0025958 0076207 0551399 -.0449324 8583475 -1.161806 rho -.8135035 0208197 chi2(1) = 480.84 ht Likelihood-ratio test of rho=0: vb 0615582 z -1.137302 z /athrho Prob > chi2 = 0.0000 k jm om l.c gm n a Lu n va y te re 58 Appendix 3: The marginal effects for Pr(formal=1, informal=1) mfx compute, predict(p11) t to ng Marginal effects after biprobit y = Pr(formal=1,informal=1) (predict, p11) = 18358534 hi ep variable dy/dx w age gender* marita~t* edu hhsize income saving~t landsize agricu~s* network* location* Std Err n lo ad 00079 03532 02412 00286 00279 00007 00023 00068 01975 01875 01625 ju y th -.0019257 -.0335559 1322072 0089765 -.0117955 -2.56e-06 -.0000426 0011303 0120594 0348592 1144395 z yi pl -2.43 -0.95 5.48 3.14 -4.23 -0.04 -0.19 1.67 0.61 1.86 7.04 P>|z| [ 95% C.I ] 0.015 0.342 0.000 0.002 0.000 0.970 0.851 0.095 0.541 0.063 0.000 -.003478 -.000373 -.102772 03566 084942 179473 003379 014574 -.017266 -.006325 -.000138 000133 -.000488 000402 -.000198 002459 -.026649 050768 -.001897 071615 082583 146296 X 47.1327 839028 855453 8.33968 5.75493 88.226 22.4184 10.9917 670828 561104 79435 al n ua (*) dy/dx is for discrete change of dummy variable from to va n Appendix 4: The marginal effects for Pr(formal=1, informal=0) fu ll mfx compute, predict(p10) m oi Marginal effects after biprobit y = Pr(formal=1,informal=0) (predict, p10) = 5045949 P>|z| [ 95% C.I .002444 006721 -.004315 181468 -.204247 -.01146 -.006467 008983 010675 026033 -.000472 -.000091 000381 00154 -.000061 003191 -.047753 062814 -.102937 001479 153788 264276 k jm X 47.1327 839028 855453 8.33968 5.75493 88.226 22.4184 10.9917 670828 561104 79435 om l.c n a Lu (*) dy/dx is for discrete change of dummy variable from to gm 0.000 0.062 0.028 0.750 0.000 0.004 0.001 0.059 0.789 0.057 0.000 ht 4.20 1.87 -2.19 0.32 4.68 -2.89 3.25 1.89 0.27 -1.90 7.42 ] vb 00109 04739 04918 00394 00392 0001 0003 00083 02821 02664 02819 z z 0045826 0885767 -.1078536 0012581 0183539 -.0002817 0009607 0015651 0075307 -.0507289 2090319 Std Err z age gender* marita~t* edu hhsize income saving~t landsize agricu~s* network* location* dy/dx at nh variable n va y te re 59 Appendix 5: The marginal effects for Pr(formal=0, informal=1) t to mfx compute, predict(p01) ng hi Marginal effects after biprobit y = Pr(formal=0,informal=1) (predict, p01) = 27324684 ep variable dy/dx w n age gender* marita~t* edu hhsize income saving~t landsize agricu~s* network* location* lo ad ju y th -.0030544 -.061934 0469426 -.0064622 -.009818 0002593 -.000854 -.002101 -.0139282 0259274 -.2462988 Std Err yi pl -3.29 -1.45 1.20 -1.92 -2.96 3.18 -3.19 -2.84 -0.58 1.15 -8.54 P>|z| [ 95% C.I 0.001 0.146 0.230 0.055 0.003 0.001 0.001 0.004 0.564 0.251 0.000 -.004876 -.145462 -.029635 -.013065 -.01631 000099 -.001379 -.00355 -.061251 -.018345 -.302848 ] -.001233 021594 12352 00014 -.003326 000419 -.000329 -.000652 033394 0702 -.189749 X 47.1327 839028 855453 8.33968 5.75493 88.226 22.4184 10.9917 670828 561104 79435 ua al 00093 04262 03907 00337 00331 00008 00027 00074 02414 02259 02885 z (*) dy/dx is for discrete change of dummy variable from to n n va ll fu Appendix 6: The marginal effects for Pr(formal=0, informal=0) oi m mfx compute, predict(p00) at nh Marginal effects after biprobit y = Pr(formal=0,informal=0) (predict, p00) = 03857292 dy/dx Std Err z P>|z| [ 95% C.I z variable ] X z -.000194 000989 -.015482 029309 -.119209 -.023384 -.005961 -.001584 001114 005405 -.000026 000076 -.00024 000112 -.00111 -.000079 -.021077 009754 -.024654 004538 -.105026 -.04932 47.1327 839028 855453 8.33968 5.75493 88.226 22.4184 10.9917 670828 561104 79435 om l.c n a Lu (*) dy/dx is for discrete change of dummy variable from to gm 0.188 0.545 0.004 0.001 0.003 0.339 0.475 0.024 0.472 0.177 0.000 k 1.32 0.61 -2.92 -3.38 2.98 0.96 -0.71 -2.26 -0.72 -1.35 -5.43 jm 0003 01143 02445 00112 00109 00003 00009 00026 00787 00745 01421 ht 0003976 0069132 -.0712963 -.0037724 0032595 0000249 -.0000641 -.0005944 -.0056619 -.0100577 -.0771727 vb age gender* marita~t* edu hhsize income saving~t landsize agricu~s* network* location* n va y te re 60 Appendix 7: The marginal effects for the marginal probability of outcome Pr(formal=1) t to mfx compute, predict(pmarg1) ng Marginal effects after biprobit y = Pr(formal=1) (predict, pmarg1) = 68818024 hi ep variable dy/dx w age gender* marita~t* edu hhsize income saving~t landsize agricu~s* network* location* Std Err n lo ad 00108 04746 0502 0039 00382 00009 00032 00089 02795 02628 03116 ju y th 0026569 0550208 0243537 0102346 0065585 -.0002843 0009181 0026954 0195901 -.0158697 3234715 z yi pl 2.47 1.16 0.49 2.63 1.72 -3.03 2.86 3.04 0.70 -0.60 10.38 P>|z| [ 95% C.I 0.014 0.246 0.628 0.009 0.086 0.002 0.004 0.002 0.483 0.546 0.000 000544 -.038009 -.074042 002593 -.000921 -.000468 000289 000956 -.035183 -.067379 262403 ] 004769 14805 122749 017876 014038 -.0001 001547 004435 074363 035639 38454 X 47.1327 839028 855453 8.33968 5.75493 88.226 22.4184 10.9917 670828 561104 79435 al n ua (*) dy/dx is for discrete change of dummy variable from to va n Appendix 8: The marginal effects for the marginal probability of outcome Pr(informal=1) ll fu oi m mfx compute, predict(pmarg2) dy/dx Std Err z P>|z| [ 95% C.I z variable at nh Marginal effects after biprobit y = Pr(informal=1) (predict, pmarg2) = 45683218 ] X z -.002709 004496 276044 010704 -.013465 00046 -.000293 000763 056762 115965 -.068415 om n a Lu (*) dy/dx is for discrete change of dummy variable from to 47.1327 839028 855453 8.33968 5.75493 88.226 22.4184 10.9917 670828 561104 79435 l.c -.007252 -.195475 082256 -.005675 -.029762 000053 -.001501 -.002705 -.0605 005609 -.195303 gm 0.000 0.061 0.000 0.547 0.000 0.013 0.004 0.273 0.950 0.031 0.000 k -4.30 -1.87 3.62 0.60 -5.20 2.48 -2.91 -1.10 -0.06 2.16 -4.07 jm 00116 05101 04944 00418 00416 0001 00031 00088 02991 02815 03237 ht -.0049801 -.0954899 1791499 0025143 -.0216135 0002568 -.0008966 -.0009707 -.0018688 0607866 -.1318592 vb age gender* marita~t* edu hhsize income saving~t landsize agricu~s* network* location* n va y te re 61 Appendix 9: The marginal effects for the conditional probability of outcome given outcome Pr(formal=1 | informal=1) t to mfx compute, predict(pcond1) ng Marginal effects after biprobit y = Pr(formal=1|informal=1) (predict, pcond1) = 40186605 hi ep variable dy/dx w age gender* marita~t* edu hhsize income saving~t landsize agricu~s* network* location* Std Err n lo ad 00139 05594 05544 00499 00485 00012 00042 00121 03472 0334 02744 ju y th 0001656 0091813 1823971 0174376 -.0068073 -.0002315 0006955 0033281 0280028 0232474 315576 z yi pl 0.12 0.16 3.29 3.49 -1.40 -1.94 1.65 2.75 0.81 0.70 11.50 P>|z| [ 95% C.I 0.905 0.870 0.001 0.000 0.161 0.052 0.099 0.006 0.420 0.486 0.000 -.002555 -.100455 073745 007654 -.01632 -.000465 -.000131 000957 -.040052 -.042209 261796 ] 002886 118818 291049 027221 002705 2.0e-06 001522 005699 096058 088704 369356 X 47.1327 839028 855453 8.33968 5.75493 88.226 22.4184 10.9917 670828 561104 79435 al n ua (*) dy/dx is for discrete change of dummy variable from to va n Appendix 10: The marginal effects for the conditional probability of outcome given outcome Pr(informal=1 | formal=1) ll fu oi m mfx compute, predict(pcond2) at nh Marginal effects after biprobit y = Pr(informal=1|formal=1) (predict, pcond2) = 26676927 dy/dx Std Err z P>|z| [ 95% C.I z variable ] X z -.005942 -.001715 -.173156 024788 120187 254218 001477 016676 -.027182 -.012183 -.000081 000294 -.000994 000158 -.001125 00232 -.043421 063478 006497 106836 00342 118338 47.1327 839028 855453 8.33968 5.75493 88.226 22.4184 10.9917 670828 561104 79435 om l.c n a Lu (*) dy/dx is for discrete change of dummy variable from to gm 0.000 0.142 0.000 0.019 0.000 0.265 0.155 0.497 0.713 0.027 0.038 k -3.55 -1.47 5.48 2.34 -5.14 1.12 -1.42 0.68 0.37 2.21 2.08 jm 00108 0505 03419 00388 00383 0001 00029 00088 02727 0256 02932 ht -.0038282 -.0741843 1872024 0090764 -.0196825 0001065 -.0004178 0005976 0100288 0566662 060879 vb age gender* marita~t* edu hhsize income saving~t landsize agricu~s* network* location* n va y te re 62