INTRODUCTION 1 2 3 4 5
I Structure of the thesis
2.1.1 Households and households in rural area
A household, defined as a group of at least two individuals pooling their incomes, plays a significant role in economic activities (Ringen, 1991) Research by McCarty (2001) indicates that households residing in rural areas are more inclined to seek loans from formal credit sources compared to their urban counterparts.
The credit market emerges to address the financial dynamics between households, where those in need of resources seek to borrow, while resource-rich households aim to lend for interest earnings This market plays a crucial role in transferring resources from affluent households to those in need, effectively facilitating economic interactions and supporting household financial stability.
Rural finance encompasses the provision of financial services to individuals in rural areas engaged in agricultural production or small businesses This sector includes formal, informal, and semiformal credit systems, offering a variety of products and services such as loans, deposits, payment services, money transfers, and insurance.
2.1.2 Formal credit versus Informal credit
Formal credit refers to the structured financial market defined by Ghate (1992) as a space where financial activities are regulated and overseen by the government This market is significantly more advanced in urban areas compared to rural regions, featuring numerous bank branches and vibrant financial activities.
Informal credit: In developing countries, the main reason for the existence of the informal credit sector is the underdevelopment of the formal credit sector
The informal credit sector offers loans with more accessible requirements compared to the formal credit sector, as borrowers and lenders often have a pre-existing relationship and live in close proximity This familiarity fosters trust, motivating borrowers to diligently repay their loans Additionally, informal lenders typically do not require collateral or extensive documentation, making the borrowing process simpler and more straightforward.
LITERATURE REVIEW I 2.1 Definitions
Households and households in rural areas
A household is defined as a group of at least two individuals who pool their incomes for shared expenses (Ringen, 1991) Research by McCarty (2001) indicates that rural households are more inclined to seek loans from formal credit sources compared to their urban counterparts.
The credit market emerges to meet the contrasting needs of households, where those with material abundance seek to lend for interest earnings, while those in need of resources require borrowing This market effectively facilitates the transfer of materials from surplus households to those lacking them, thereby fulfilling the financial demands of both parties.
Rural finance encompasses the provision of financial services to individuals residing in rural areas, primarily engaged in agricultural activities or small businesses This sector includes formal, informal, and semiformal credit systems, offering a variety of products and services such as loans, deposits, payment solutions, money transfers, and insurance.
2.1.2 Formal credit versus Informal credit
Formal credit refers to financial markets that are regulated and overseen by the government, as defined by Ghate (1992) These markets are significantly more developed in urban areas compared to rural regions, featuring numerous bank branches and vibrant financial activities.
Informal credit: In developing countries, the main reason for the existence of the informal credit sector is the underdevelopment of the formal credit sector
The informal credit sector provides loans with simpler requirements compared to the formal credit sector, as borrowers and lenders often have pre-existing relationships in close communities This familiarity fosters trust, prompting borrowers to prioritize repayment Lenders typically forego traditional collateral and documentation, instead relying on informal agreements to ensure repayment Despite the potential for exploitation through high-interest, short-term loans that can trap borrowers in debt, moneylenders remain a crucial component of the informal credit landscape.
Micro finance and Access to credit
McCarty (200 1) defines micro finance is lending and saving activities in small-scale of households in the rural area
Microfinance is crucial in alleviating poverty, as highlighted by the ADB By providing access to microfinance, low-income individuals can manage their expenses, grow their businesses, and ultimately enhance their income and quality of life Key services offered by microfinance include loans, deposits, payment services, money transfers, and insurance.
• formal institutions (rural banks and cooperatives)
• semiformal institutions (non- government organizations NGO)
• informal sources (money lenders and storekeepers)
Microfinance is most often provided by non-bank institutions such as NGO Microfinance institutions are often based on the group-lending approach
Financial exclusion: is a process that the formal credit sector performs to prevent borrowers from getting credit (John D Conroy, 2004)
A repressed financial system occurs when the government establishes interest rates below the market's equilibrium level, resulting in negative real interest rates that fall short of the inflation rate (McCarty, 2001).
Access to credit, defined as the availability of quality financial services at reasonable costs, remains a significant challenge in many regions despite the growth of financial institutions According to Jan Van Heeswijk at the Access to Finance International Conference in 2004, limited access to reliable and flexible financial services persists In some countries, inadequate quality in financial services leads to restricted credit availability and high interest rates, highlighting the ongoing need for improvement in the financial sector.
Developing countries realized the importance of bringing some basic financial services such as deposits, savings, payments, loans, and insurance to the poor households
According to Diagne (1999), a household is considered to have access to credit if it can borrow from a source, regardless of its borrowing needs, as long as the amount received is greater than zero If the amount is zero or below the desired borrowing amount, the household is deemed constrained The maximum borrowable amount is referred to as the credit limit Nimal A Fernando (2007) further elaborates that an individual enjoys full access to formal financial services when they can utilize these services whenever needed.
Access to finance can be effectively addressed through a combination of financial and non-financial sector measures Key non-financial strategies include enhancing education, improving infrastructure, and providing essential services like basic healthcare.
Theoretical framework related to determinants that affecting to the formal credit
Credit rationing occurs when lenders provide loans at amounts lower than their potential supply, even if borrowers are willing to pay higher interest rates This phenomenon results in an inefficient credit market, as highlighted by Stiglitz and Weiss (1981).
Lenders' credit rationing decisions are influenced by borrower characteristics, anticipated project returns, loan terms, and credit market imperfections When the total loan repayment exceeds expected returns, the likelihood of default increases, prompting lenders to offer a lower credit amount than requested or to deny credit altogether.
Interest rates serve as the price of credit and a mechanism for managing financial risks When demand for credit exceeds supply, interest rates rise, increasing lenders' income and mitigating associated risks Conversely, low interest rates can lead to credit rationing, where funds are limited without the option for interest rates to increase (Nathan Okurut, Andrie Schoombee & Servaas van der Berg, 2004).
Now, we review three theoretical paradigms to show a picture about the operations of the formal and informal credit sector as well as the process of making decisions of households
2.2.1 Traditional approach- the dominant paradigm in the 1950s-1970s
This approach expands on Keynesian perspectives regarding the government's role, positing that in developing countries, insufficient capital is the primary barrier preventing households from accessing the formal credit sector.
Governments provide credit for agricultural production at subsidized interest rates, often lower than inflation, which focuses on addressing constraints in the rural financial environment rather than alleviating them This strategy assumes that potential savings in rural areas are insufficient for the formal credit sector to mobilize or offer savings facilities To disrupt the cycle of capital scarcity in rural regions, the government should inject external funds to foster investment instead of creating agricultural credit organizations that cater solely to consumption needs (Doug Pearce, 2004).
Borrowers are highly responsive to fluctuations in interest rates; a reduction in rates enables households to adopt new technologies and enhance their investment productivity To facilitate access to affordable credit for households, government intervention in the credit market is essential through the implementation of credit policies like interest rate ceilings and subsidies.
The traditional approach to subsidized credit programs has significant weaknesses, as they have not effectively contributed to agricultural growth Access to formal credit has largely been limited to large-scale farmers and wealthy households, forcing others to rely on the informal sector Consequently, government policies have become distorted, leading to repression in the growth of the credit market (Doug Pearce, 2004).
The traditional perspective recommends that governments in developing nations implement low interest rate policies, highlighting that land size and consumption patterns may significantly influence households' ability to access formal credit.
Figure 1: The vicious circle of capital formation
Source: http://www.economicsconcepts.com/nurkse's model of vicious circle of poverty (vcp).htm
The financial systems approach posits that institutions operating on commercial principles can achieve significant outreach and sustainability To foster the growth of these institutions, the government must create a supportive environment Additionally, financial institutions and credit programs should effectively and flexibly meet household credit demands.
This approach recognizes the importance of the formal sector, emphasizing that the informal sector cannot substitute it It posits that financial system liberalization will enhance financial efficiency, reduce the disparity between bank deposit rates and interest rates, boost capital flow between segments, limit the growth of the informal credit sector, and expand access to formal credit in developing countries (McKinnon, 1973).
Agricultural production poses unique challenges for credit provision due to its need for flexible arrangements Consequently, lenders often prefer to extend loans to larger borrowers rather than a multitude of smaller ones, as this approach helps minimize lending costs.
In 1976, it was noted that formal financial institutions often provided subsidized credit to borrowers with political or social influence (Von Pischke, 1983) To address the challenges faced by borrowers in developing countries, microfinance institutions (MFIs) introduced innovative savings options, enhancing accessibility and flexibility to mitigate seasonal income fluctuations They also leveraged technology, such as cash machines and mobile phones, to lower costs and broaden rural financial services, while adopting village bank models as a form of institutional innovation These strategic changes and innovations can significantly enhance the formal credit sector (Doug Pearce, 2004).
Some weakness of this approach:
The rural credit market faces significant challenges, including moral hazard and adverse selection, stemming from underdevelopment and asymmetric information Instead of tackling these information-related issues, the formal credit sector opts to impose high interest rates These elevated rates are not indicative of limited funds but rather reflect the substantial costs associated with information asymmetries.
This approach supposed that the governments should keep the extension of the financial and banking sectors under their control in order to increase revenues from other channels
In conclusion, the financial repression strategy recommends that developing countries implement high interest rate policies to boost savings, thereby facilitating investment in agricultural production This approach highlights that factors such as loan size and the social and political status of households can influence access to formal credit Additionally, credit allocation may be shaped by government intervention as well as the rational behaviors of both lenders and borrowers.
This approach, akin to financial repression, acknowledges the imperfections in the credit market However, it emphasizes that credit allocation occurs through non-interest rate mechanisms driven by the rational behaviors of lenders and borrowers operating within an asymmetric information environment, rather than being dictated by government regulations.
In credit market, asymmetric information arises when the lenders do not have enough reliable information about the borrowers' potential risk of default (Aleem,
Credit market model
There is a significant difference between access and usage of financial services
Access refers to the ability to utilize financial services, while use signifies the actual engagement with those services A person may have access to a financial service but may choose not to utilize it.
Inversely, a person may want or need a financial service, but he does not have access to it (Genesis Analytics, 2004 )
Access to services encompasses various dimensions, including timely availability tailored to individual needs, affordability, and unrestricted credit resources for borrowers Additionally, these services must generate profits for lenders to ensure their continuous and sustainable provision Consequently, measuring access can be challenging (Asli Demirguc-Kunt, Thorsten Beck & Patrick Honohan, 2006).
Credit functions as a commodity, where the interest rate influences both its demand and supply This dynamic indicates that the choices made by borrowers and the decisions of lenders simultaneously impact households' access to credit.
A credit market is characterized by limited supply but excess demand (Nathan Okurut et al., 2004)
Patrick Honohan (2004) proposed that considering the access to finance on both sides:
The demand side: includes the contribution of getting credit to household welfare The supply side: includes cost conditions and other barriers to access There are three barriers to access:
Price barriers in accessing formal credit institutions encompass not only the fees set by these organizations, influenced by factors like technical efficiency, regulatory frameworks, taxation, and market competition, but also the additional expenses households incur, such as transportation and communication costs necessary for utilizing these services.
Price barriers are used to measure the level of using the financial services
*Information barriers: increase the cost of credit and restrain a certain number of households in getting access to formal credit Information barriers raise credit rationing too
Reforming and finishing procedures and laws relating to activities in the credit market can help reducing the need for information
*Product and service design barriers: h
The formal credit sector's products and services often do not meet household needs due to mismatched loan contract terms that fail to align with borrowers' cash flow patterns Additionally, in vast rural areas, the challenge of collecting small household savings is exacerbated by a lack of branch locations and cumbersome administrative procedures that increase transaction costs for borrowers.
Now we examine the demand for credit and the supply of credit, as well as the behaviors of both borrowers and suppliers in the rural credit market
2.3.1 Households' borrowing behavior and the demand for credit
Households with access to credit may face constraints when they are unable to secure the necessary funds at current or higher interest rates This limited access to credit forces households to carefully consider their investment strategies and the inputs required for production.
Quach Manh Hao et al., (2004) assume that household i in location j at time k During the period from k-1 to k, this household would have a demand for credit rdijk function: where:
• IIijk is household characteristics vector such as: gender of householder, initial endowment, number of years of education of household head, etc d
• Q ijk is location characteristics vector such as index of location goods prices, the prices of selected goods and services, etc d
• is market conditions vector such as the price of credit and the mechanism by which credit is distributed, competition among borrowers etc d
• 8:J is unobservable characteristics of household and location vector such as the human effort and dedication h
According to Nathan Okurut et al., (2004), there are a large number of variables that have statistical significance on the credit demanded:
• Age, education and household expenditure have positive and significant effects the credit demanded
• Higher dependency ratio and higher for males than for females, higher demand of credit for a household
In the past 30 days, households have experienced increased illness, leading to a rise in the number of sick days Interestingly, households with greater land assets tend to have lower credit demand, while other types of assets do not significantly influence this trend.
Long-term investments necessitate substantial loans, while short-term investments are best supported by smaller credits In rural regions, households primarily focus on expanding production through the acquisition of additional land, new machinery, and the implementation of innovative technologies Additionally, credit is often sought for urgent consumption needs arising from emergencies such as illness, funerals, or natural disasters (Ray, 1998).
Households with stronger political and social connections, particularly those with close relationships with bank staff, tend to possess greater knowledge about credit programs This advantage enables them to apply for formal credit more easily and at an earlier stage (Donald, 1976).
Households with higher education levels tend to have greater access to formal credit due to their superior investment strategies and ability to navigate complex loan processes In contrast, wealthier households often exhibit lower demand for credit, as their financial stability reduces the need for borrowing Additionally, younger households with more children may seek larger loans to meet their increased consumption needs.
Household demand for credit is influenced by several key factors, including income levels, asset ownership, investment and consumption expenditures, and production characteristics Additionally, the age, education, and socio-political status of household heads play significant roles in shaping credit needs.
2.3.2 Credit supply and behavior of formal lenders
Nathan Okurut et al (2004) discovered that the availability of credit is significantly influenced by demand, particularly when interest rates are perceived as high Their research indicates that banks are motivated to serve low-income individuals primarily for profit To enhance access to credit for a broader range of households, they recommend that the government implement incentives for banks, such as subsidies, tax remissions, or support to cover operational costs.
Banks mitigate lending risks through three key steps: assessing potential borrowers to identify defaults, assisting borrowers in meeting credit obligations, and diversifying recovery strategies for loans and interest Due to asymmetric information, banks often require collateral to evaluate creditworthiness and address incentive and enforcement challenges However, this collateral requirement and high transaction costs hinder access to credit for low-income individuals Additionally, banks' inconvenient locations, high salaries for skilled staff, and the costs associated with standardizing transaction procedures further complicate access for the poor, who also invest significant time and resources in navigating banking systems Consequently, banks struggle to satisfy the credit needs of low-income clients (Nathan Okurut et al., 2004).
According to Quach Manh Hao et al., (2004 ), the supply of credit rsijk governs the credit that the household can access to: where:
• Y is a vector of lender characteristics (lender is formal or informal, non- profit or for-profit, available funds or not available funds, etc)
• s is market conditions vector (the lenders' competition, mechanism, etc) h
• f.J s is unobservable characteristics vector (the lenders' assessment about the local comparative advantage, etc)
Credit rationing mechanisms involve the selective engagement of both borrowers and lenders, influenced by the high costs associated with borrowing Borrowers may opt not to borrow or may seek amounts lower than what is offered, while lenders may choose not to fulfill the entire requested amount Key socio-economic factors, including household size, the education level of the householder, household expenditures, and assets (excluding land), significantly enhance credit supply (Nathan Okurut et al., 2004) Additionally, factors such as education, health, age, occupation, skills, income, and assets of borrowers impact banks' assessments of households' creditworthiness.
In developing countries, the formal credit sector often faces a supply-demand imbalance, with credit availability consistently falling short of demand As a result, banks must carefully allocate their limited loan resources among applicants, typically favoring borrowers who can demonstrate sufficient information that ensures the responsible use of credit and the potential for profitability (Moll, 2000).
Empirical studies related to the determinants that affecting to the formal credit by
Access to credit is crucial for economic development in developing countries like Vietnam When individuals can obtain credit, they gain opportunities to open accounts, borrow, save, and invest, which empowers them to escape the cycle of poverty.
Access to credit in rural areas of developing countries is influenced by various factors This section examines empirical studies that identify the key determinants affecting households' ability to secure formal credit.
2.4.1 The household characteristics that are expected to have effects on making decisions of both borrowers and lenders: a The age of the household head
Older households face significant challenges in accessing formal credit due to their risk-averse nature and fear of incurring debt Additionally, they often struggle to comprehend the terms of credit contracts and the workings of formal credit institutions (Khalid Mohamed, 2003).
Older households typically possess greater savings and are often out of the workforce, leading to reduced consumption compared to younger households As a result, their demand for credit tends to be lower (Vu Thi Thanh Ha, 2001).
Older households are valued by banks due to their greater assets, experience, reputation, and sense of responsibility, which results in increased access to formal credit (Le Khuong Ninh, 2003) Additionally, the gender of the household head plays a significant role in credit access.
Khalid Mohamed (2003) discovered that gender significantly impacts a household's access to formal credit, indicating that women face greater challenges in securing loans from the formal credit sector Despite some support through specialized credit programs, women's opportunities for obtaining credit remain limited Additionally, the marital status of the household head may further influence access to financial resources.
Marital status does not significantly impact an individual's access to credit, indicating that whether a person is married or single has no bearing on their creditworthiness Additionally, the educational attainment of the household head plays a crucial role in determining financial opportunities.
According to Quach Manh Hao et al., (2003), rural borrowers with low level of education find difficult in understanding and preparing necessary forms and documents
Higher levels of formal education are often associated with increased access to formal credit; however, many small credit programs have been designed to support the poor, particularly those in rural areas with lower educational attainment These initiatives have successfully benefited individuals with limited education, demonstrating that access to credit can extend beyond traditional educational barriers (Khalid Mohamed, 2003).
Nguyen Huu Cuong (2007) found that the households with highest and lowest level of education usually borrow least e The occupational activities
The main occupation of a household influences access to credit, as the nature of the activity and its investment needs can impact the household's demand for additional funds However, research indicates that this effect is not significant (Khalid Mohamed, 2003) Additionally, the social and political engagement of the household head plays a role in this dynamic.
Nguyen Van Ngan (2003) discovered that a household's social or political position positively influences the size of formal loans in Vietnam This is primarily because households with such positions tend to avoid illegal credit sources, like moneylenders and tontines, opting instead for formal loans Additionally, factors such as household size and dependency ratio may also play a role in this dynamic.
Households with larger sizes or higher dependency ratios often exhibit increased credit demand; however, banks are typically reluctant to lend to them due to concerns about their low production capacity and repayment ability (Nathan Okurut et al., 2004).
Households operating large farms typically require greater capital for production, necessitating the pursuit of external financing options Additionally, the size of the farm positively influences the household's ability to access credit.
Households that utilize land more productively, influenced by the type and location of their land, are more likely to gain access to formal credit This indicates that higher land productivity positively impacts a household's ability to secure credit, emphasizing the importance of land ownership in financial opportunities.
Collateral requirements significantly impact households' access to formal credit, with the Land Use Certificate (LUC) serving as the primary form of collateral Importantly, each household is restricted from utilizing the same LUC as collateral for multiple loans simultaneously (Quach Manh Hao et al., 2003).
Having a Land Use Certificate (LUC) is often believed to enhance a household's access to formal credit However, research by Do Quy Toan and Lakshmi Iyer (2007) challenges this assumption, indicating that LUC does not necessarily improve access to formal credit In instances of loan default, banks face significant difficulties in seizing land due to opaque regulations and a lack of support from commune officials for transferring land to individuals residing in different regions.
Chapter remark
This chapter presents a theoretical framework for analyzing the determinants influencing household access to formal credit in rural areas Due to the imperfections in the credit market, traditional price mechanisms, such as interest rates, are ineffective Instead, access to formal credit is impacted by four key factors: household characteristics, lender characteristics, location characteristics, and local market characteristics.
Household access to formal credit is significantly influenced by several key factors, including farm size and land ownership, the value of household assets, production scale and cycles, the social or political engagement of the household head, and overall household expenditure.
RESEARCH METHODOLOGY26
Numerous studies have employed various econometric methods to investigate rural households' access to formal credit, with two prevalent approaches focusing on either the combined or separate effects of household characteristics on credit sources This study utilizes both demand and supply factors to assess access to the formal credit sector through a logistic model and Ordinary Least Squares (OLS) method Access to formal credit can be analyzed in two ways: first, as a binary variable indicating whether credit is received or not, and second, as a measure of the extent of access, quantified by the amount of loans obtained from the formal credit sector.
Household characteristics significantly influence both the demand and supply sides of the credit market This analysis is effective in assessing households' access to the formal credit sector, utilizing data from the VHLSS 2006 and VHLSS 2008 Consequently, this methodology will be employed in the thesis.
In this article, I will employ the inductive method to analyze data from the Vietnam Household Living Standards Survey (VHLSS) to create a comprehensive overview of microfinance (MD) and its credit activities Additionally, I will utilize the deductive method to evaluate the validity of the key factors influencing households' access to formal credit.
MD from analyzing the above data
The model built based on both theoretical and specific situation with the data of
A Logistic model is employed to assess the likelihood of households obtaining loans from the formal credit sector, utilizing a binary variable, PHA, which indicates access to formal credit in the MD region This variable is assigned a value of one if a household can secure sufficient borrowing from formal sources, signifying access to credit Conversely, if a household is unable to borrow or can only secure insufficient funds, the variable is marked as zero, indicating a lack of access to formal credit.
This study utilizes the Ordinary Least Squares (OLS) method to analyze the varying bank loan amounts received by households, with the dependent variable being the loan amount (LA) measured in millions of VND.
The model can be presented as:
Dependent variable = f (HC, CE, LC), where:
* Dependent variable is PHA in logistic model:
PHA = 1 if household can access to formal credit sector)
* Dependent variable is LA in the OLS model to examine household's bank loan amount:
- HC: vector of householder characteristics
CE: vector of household' characteristics endowments
LC: vector of loan characteristics
The study examines the impact of various independent variables on household access to formal credit in Vietnam Key characteristics of the householder, such as age, gender, and education level, are analyzed due to their significant role in family and community decision-making Additionally, factors related to household characteristics, including household size, employment status, and real per capita expenditure of rural poor, are considered to understand their influence on credit demand.
The article discusses key factors influencing access to formal credit, including whether a household owns a home, the size of their farm, and their poverty status It highlights the importance of understanding loan characteristics, such as the purpose of the loan and its associated costs, which can significantly impact borrowing opportunities By analyzing these elements, we can better understand the barriers faced by households in securing credit.
PURPOSEOFLOAN) and the interest rate of the loan
This thesis utilizes data from the Vietnam Household Living Standard Survey (VHLSS) conducted in 2006 and 2008, focusing on rural households in the Mekong River Delta that face challenges in accessing credit from formal financial institutions With a total of 885 observations from VHLSS 2006 and 856 from VHLSS 2008, the research aims to analyze the credit demands of these households and propose policy implications to facilitate easier access to credit The extracted data will undergo descriptive and econometric regression analysis to support the findings.
Here is the summary of the independent variables (signatures, explanations, where to extract them from the VHLSS and their expected signs) h
Table 3.1: Table of independent variables
Name of independent Explanation Unit Where to extract Expected variables variable from VHLSS sign
Household is poor or not
=0: otherwise Household uses loan for what
= 1: if loan used for Production
2 purposeofloan capital, Capital investment, Item 8, question ambiguous
= 0: if loan used for consumption and others
3 percentinterestrate The interest rate of the loan percenta Item 8, question ge number 15a -
4 housevalue Value of living house 1,000 Item 7, question ambiguous VND number 12
5 pcexp2rl Real per capita expenditure 1,000
6 farmsize Size of farm household owned mz Item 4BO, question number 3b +
7 hhsize The total number of members in
Item hhexp08 ambiguous a household person
8 empwage =1: work for wage/salary number Ia +
=0: don't work Household production or service planting breeding, forestry or
=1: if self-employ in number lb + agricultural sector
Do trading or business for the household
10 empseltNAg =I: if self-employed in trading Item 4A, question
=0: otherwise Sex of household head
11 sex =1: ifmale Item 1 A, question ambiguous number2
12.age Age of household head years old Item 1A, question ambiguous number 5
The number of year that Item 2, question
13 hhedu household head attend in school years number 1 +
The household head owns living house or not Item 7, question
14 houseown = 1: if owning (partially or fully) number6 +
FINANCIAL SYSTEM AND ACCESS TO FORMAL CREDIT
Rural financial system in Vietnam
4.1.1 Overview of rural financial supplier
The rural financial market in Vietnam operates under the regulations and policies of the government and the State Bank of Vietnam Like many developing countries, it is classified as a repressed market, characterized by segmentation in borrowing purposes, loan conditions, amounts, and terms Additionally, both formal and informal credit sectors function concurrently within this market.
In the current market, the formal credit sector is reluctant to offer loans for consumption, forcing households to rely on informal sources such as relatives, friends, and neighbors for borrowing When households are deemed poor credit risks, they often turn to moneylenders, particularly during emergencies like illness, funerals, or weddings.
Households tend to prefer informal borrowing sources due to their lower total borrowing costs compared to formal credit sectors, which often involve high transaction fees despite lower interest rates This trend is particularly evident for small loans and funding production activities.
The credit market is categorized into three sectors: formal, semi-formal, and informal The formal credit sector encompasses government commercial banks, private banks, and organized credit institutions, all of which operate under the regulatory framework of the law on Credit Organizations However, this sector has faced criticism for its inability to meet the timely credit needs of impoverished communities.
The Vietnam Bank for Agriculture and Rural Development (VBARD)
Established in 1988, VBARD is not only the largest commercial bank in the country but also the major financial provider in rural areas, with branches in every provinces of Vietnam h
Methodology: three different credit methodologies:
First, VBARD decides to provide credit to borrowers based on the requirement about collateral such as LUCs
VBARD offers loans to individuals within a group, requiring that all members share the responsibility for repayment if one person defaults A new loan can only be issued once the group is debt-free This approach enhances VBARD's reach among rural households and lowers the transaction costs linked to managing multiple small loans.
Third, VBARD lends guarantee groups through mass organizations such as Vietnamese Women Union, which targets borrowers unable to provide collateral
As of the end of 2011, VBARD reported that the total outstanding loans reached 443.47 trillion dong, with over 301 trillion dong allocated to agriculture and rural development, representing 68% of the total credit.
In 2001, it was estimated that 47% of VBARD clients were poor, reaching 35% of low-income households In 2010, 70% ofVBARD clients were poor
VBARD has collaborated with international sponsors to implement various rural development initiatives, including the World Bank-funded Rural Finance Projects (I, II, and III), the Rural Credit Project supported by the Asian Development Bank (ADB), and the Hunger Elimination and Poverty Reduction Project in partnership with the German Bank for Reconstruction (KFW).
By using mobile banking units, VBARD officials go to remote communes to seek borrowers, process their applications, disburse money and collect repayments, mobilize savings
The Vietnam Bank for Social Policies VBSP h
Founded in 1995, VBSP operates preferential credit programs aimed at assisting the poor, collaborating with various social organizations to support government initiatives focused on hunger eradication and poverty reduction.
VBSP provides loans to low-income households without requiring collateral, utilizing a group lending approach where interest rates and loan terms are determined by the purpose of the borrowing, loan amount, and borrower creditworthiness While local committees are intended to select truly low-income households for subsidized credit, the process can sometimes inadvertently include more affluent individuals.
To the end of the year 2003, VBSP served for 3.3 million clients, in which 1 million were the poor
Mr Nguyen Van Ly, Deputy General Director of VBSP, announced that the bank has provided over 600 billion dong in funding to support business and production initiatives for the poor across 61 disadvantaged districts.
VBSP annually receives government subsidies to offer credit to the poor at subsidized interest rates As a non-profit organization, VBSP operates with a negative interest margin between loan rates and deposit rates.
The People's Credit Fund (PCFs)
Established in 1993, People's Credit Funds (PCFs) are autonomous, member-owned financial institutions primarily operating in local communities While they do not specifically target low-income individuals, 56% of their clients were from low-income households as of 2001 PCFs primarily mobilize savings from their members, which constitute 66% of their total resources Additionally, the semi-formal sector represents a small portion, accounting for 5 to 10% of Vietnam's rural credit market.
Government ministries and programs: Microcredit is usually a component of a larger program, which is performed by the Ministry of Planning and Investment, h
The Ministry of Labor, the Ministry of Agriculture and Rural Development, and the Ministry of War Invalids and Social Affairs offer programs that provide credit at very low or even zero interest rates Since the establishment of the Vietnam Bank for Social Policies (VBSP), these programs have been gradually transferred to the bank, enhancing access to financial support for various sectors.
Mass organizations in Vietnam, including the Vietnamese Women Union (VWU), Farmers' Union (FU), and Vietnam Youth Union (VYU), operate under government control and offer essential social and economic services to their members International NGOs play a crucial role by implementing microfinance projects, particularly through the VWU, where they provide credit and technical support to borrowers Additionally, the informal sector contributes significantly to the economy, highlighting the diverse landscape of support systems available to various communities.
The sector, once accounting for 70% of total credit in the early 1990s, has diminished in importance but continues to thrive due to the underdevelopment of the formal credit market Currently, there are three primary suppliers within this sector.
Households in the Mekorig River Delta
The cost of formal money transfers can range from 4% to 20% of the amount sent, influenced by factors such as system availability, technology, and competition among transfer networks (Orozco, 2003).
The government restricts remittance services to authorized financial organizations to ensure a reliable and transparent transfer system, which helps prevent issues like money laundering However, this regulation may lead to reduced competition among these financial institutions.
Technology to promote rural finance
The integration of technological advancements in rural finance, including computers, Local Area Networks, the Internet, and Automatic Teller Machines, has significantly lowered transaction costs and enhanced the quality of financial services However, numerous rural communities remain disconnected from these technologies, preventing them from reaping the benefits.
Making use of existing institutional infrastructure
Institutional infrastructure encompasses various financial entities such as commercial banks, state banks, leasing firms, post offices, commercial bond markets, and life insurance companies However, the market currently lacks private bonds, leasing activities remain underdeveloped, and the stock market has not reached its full potential.
Many institutions choose to deposit their funds in foreign banks to benefit from lower interest rates rather than providing loans to farmers As a result, farmers are forced to depend on the informal credit sector, making it challenging for them to expand their long-term investments.
4.2 Rural financial system in the Mekong River Delta 4.2.1 General picture of the MD
The Mekong Delta is Vietnam's largest delta, ranking fourth in area and third in population and population density Despite its favorable natural conditions, the region faces significant challenges, as evidenced by low socio-economic development indicators A 2011 survey conducted by the Ministry of Labor, Invalids, and Social Affairs revealed a high poverty rate in the Mekong River Delta.
households is still high, about 11.39%, so it is still being an imperative problem for Vietnam and local governments to deal with Here is a summary of the MD in 2010:
The geographic location is defined by the South China Sea to the east, Cambodia to the west, the Southeast economic zone to the north, and the Gulf of Thailand to the south.
*Area: 39,747 km 2 , of which 24,000 km 2 are used for agriculture and aquaculture, 4,000 km 2 for forestry
The administrative units of the region consist of 13 provinces: Long An, Tien Giang, Hau Giang, Dong Thap, Vinh Long, Tra Vinh, Can Tho, Soc Trang, Ben Tre, An Giang, Kien Giang, Bac Lieu, and Ca Mau.
*Population: 17,272 million of people, equivalent to 19.86% of population of the whole country
With 77% people living in the rural area that producing more than 1/3 the value of the agricultural products of the whole country Population density: 425 person/ km 2
* Location advantages: MD has many important markets and investors, so it is convenient to develop the economy and cooperate with the world
The Southeast Asia region boasts significant natural resource advantages, particularly in Vietnam, where it features vast and fertile agricultural land Covering a total area of 3.96 million hectares, approximately 65% is dedicated to agricultural development Notably, cultivation lands make up 50% of this area, with rice production occupying 90% of the cultivated land.
* Human resource advantages: has the largest population in the country The population in working age: 10.13 million people, the unemployment rate is 3.45%
* Economic growth rate: In period 2001- 2005, the economic growth rate is 10.5%, period
From 2006 to 2010, MD experienced a notable economic growth rate of 12%, with a slight decrease to 11.93% in 2010 This growth positions MD as a leader in economic performance compared to other regions in the country Additionally, the annual per capita income has shown consistent growth, rising from 8 million VND to 12 million VND over the last decade.
* Economic structure: has been changed from the economy depended substantially on h j
Between 1995 and 2010, the significance of agriculture in the economy declined from 61.8% to 40%, while the contributions of industry and construction rose from 11.7% to 15% Additionally, the service sector experienced growth, increasing from 21.3% to 35%.
From 2001 to 2010, the industry experienced a growth rate of approximately 15.8%, contributing to 10% of the nation's total industrial output value In comparison, agriculture accounted for 3.3% of the output and 33% of the overall value, while retail sales of goods and services showed a growth of 20.4% and represented 18% of the total market.
In 2010, the region's rice production totaled 21.6 million tons, representing over 50% of the national output, with 5.6 million tons exported, generating a value of 2.6 billion USD Additionally, aquaculture production reached 1.94 million tons, accounting for 70% of the country's total.
* Foreign direct investment: in period 1988-2010, MD only has 565 FDI projects, only accounts 4.9% of the whole country and 9.44 million USD in amount
4 Economic development plan up to 2020
Diversifying the agriculture production to supply nationally
Make fishery become an important economic sector and focus on capacity building for offshore economic development
Trading must be developed in order to fulfill the development of the region
Source: http://www.mekongdelta.com.vn and http://www.gso.gov.vn
4.2.2 Households in the Mekong River delta a Households characteristics are sex and age of household head, household size, dependency ratio, health condition and education level of household head, household's expenditures and incomes, political and social position, skill and occupation of household head, collateral, etc
Table 4.1a: Household's size, householder's age and real expenditure per capital in 2006
The average The average age The average amount of
Source of rural credit household size of householder real expenditure per capital person year 1000VND obs %
Source: Calculated by author from VHLSS 2006 h
' trable 4.lb: Household's size, householder's age and real expenditure per capital in 2008
Source of rural The average The average age of The average amount of household size credit householder real expenditure per capital person year 1000 VND obs %
ã Source Calculated by author from VHLSS 2008 i Table 4.2a: Education level and health situation of household head in 2006
The level of education The health situation
Source of rural Before Junior Junior college
Total college diploma and credit diploma Bachelor degree obs % %
Source: Calculated by author from VHLSS 2006 Table 4.2b: Education level of household head in 2008
Source of rural credit Total Before Junior Junior college diploma college diploma and Bachelor degree obs obs % obs %
Source: Calculated by author from VHLSS 2008
The analysis of the data reveals that while the average household size and age of householders remain consistent across both the formal and informal credit sectors, significant differences emerge in key characteristics Specifically, households that demonstrate higher real expenditure per capita, along with householders possessing advanced education and better health, are more likely to secure loans from the formal credit sector.
Summary
The credit market in Maryland is characterized by repression, with high demand for credit among households that remains unmet by both formal and informal lending sectors This rationing system often forces lower-income households to seek loans from informal sources, highlighting the disparity in access to credit.
There were some changes between two periods (VHLSS 2006 and VHLSS 2008) but the formal credit sector continued holding a main role in the rural market credit although its share fell down.
Determinants of credit accessibility of households in Mekong River Delta
The regression models were estimated using data from 885 rural households in the VHLSS 2006 dataset and 856 observations from VHLSS 2008 The findings are detailed in Tables 4.2a and 4.2b, indicating that the hypothesis of all coefficients being equal to zero is rejected While the coefficients of determination (R² values of 0.2456 and 0.2892 for Y1 and Y2 in VHLSS 2006, and 0.1021 and 0.3637 for Y1 and Y2 in VHLSS 2008) are relatively low, such results are common in studies utilizing large datasets and cross-sectional data.
Before conducting the regression analysis using Stata software versions 9 and 11, we addressed multicollinearity by calculating the Variance Inflation Factors (VIF) We identified and eliminated variables with a VIF of 5 or higher from the regression model Each variable was assessed individually to determine the optimal candidate for removal, ultimately selecting the regression equation that maximized the R-squared value, indicating the highest explanatory power of variance.
We also add the option "robust" to regression comment while running OLS model to eliminate the HET - heteroskedasticity
This study analyzes the results of Logistic and OLS models applied to datasets from VHLSS 2006 and VHLSS 2008 By comparing the outcomes from these two periods, the research aims to identify the key determinants influencing household access to formal credit institutions in the MD.
Here are the results after running the Logistic model and OLS model for the two datasets extracted from VHLSS 2006 and VHLSS 2008: h
Table 4.9a: Estimating the determinants ofhouseholds' access to formal credit in MD with VHLSS 2006
Names of Logistic Model OLS model variables Equation Yl: Probability to Equation Y2: Loan borrow amount
Coeff t-stat Coeff t-stat cons -1.537 -2.42 2.451 2.68 poorhousehold **-0.649 -2.55 **-0.241 -2.12 pcexp2rl **0.0001 2.35 *0.526 4.94 or Ln(pcexp2rl) purposeofloan *1.715 7.01 *0.270 3.40 houseown ***0.646 1.61 **0.103 2.14 or Ln(housevalue) hhedu *0.082 2.57 *0.031 2.62 hhsize *0.245 3.84 *0.125 4.64 sex -0.025 -0.13 -0.0007 -0.01 age **0.128 2.46 -0.001 -0.85 empwage 0.047 0.22 *-0.219 -2.62 empselfAg 0.089 0.43 ***0.160 1.71 percentinterestrate *-0.404 -6.37 ***-0.022 -1.80 farmsize *0.00002 5.25
R-squared = 0.2456 R-squared = 0.2892 Number of obs = 885 Number of obs = 885 Prob > chi2 = 0.0000 Prob > F = 0.0000
*:significant at the 1%; **:significant at the 5%; ***:significant at the 10%
Empirical results indicate that the chosen model is valid, with a Prob>chi2 value of 0.000, which is below the significance level of 5% (0.05) Key independent variables demonstrating statistical significance in both models include poor household status, real per capita expenditure, loan purpose, household size, age of the household head, education level of the household head, and interest rate percentage Additionally, certain independent variables—such as whether the household engages in wage work, participates in production or service activities like planting, breeding, forestry, or aquaculture, as well as home ownership, house value, and farm size—show significance in only one of the models.
The findings indicate that certain factors positively influence the likelihood of households accessing the formal credit sector and the amount of loans they receive Additionally, some independent variables that are not statistically significant at the 10% level are retained due to their relevance and importance.
The POORHOUSEHOLD variable negatively impacts both models, indicating that poor households face a decreased likelihood of accessing the formal credit sector and receiving larger loan amounts This is primarily due to their limited financial capacity, characterized by fewer assets and lower income, which makes it challenging for them to meet banks' collateral requirements Consequently, the financial status of these households significantly reduces their probability of obtaining formal credit and the amounts they can secure.
Real per capita expenditure (PCEXP2RL) is positively correlated with households' access to formal credit and the amount of loans received Formal lenders often focus on providing loans for production, investment, and consumption purposes As household consumption rises, the demand for credit also increases, leading to a higher likelihood of accessing formal loans and larger loan amounts.
The variable PURPOSEOFLOAN significantly influences a household's likelihood of obtaining formal credit and the amount of the loan When loans are allocated for agriculture, production, or services related to planting, breeding, forestry, or aquaculture, access to formal credit and the loan amount tend to increase Agriculture is crucial for economic development, attracting substantial capital investment across various agricultural sectors Consequently, banks and formal credit institutions are more inclined to provide loans for agricultural purposes, resulting in enhanced access to credit and larger loan sizes.
Homeownership, property value, and farm size significantly influence a household's financial capacity and access to formal credit These factors positively impact the likelihood of obtaining loans, as homes and land can serve as collateral Households with more valuable assets find it easier to secure formal credit and larger loan amounts Additionally, higher-quality housing enhances a household's repayment ability and improves their creditworthiness in the eyes of lenders Consequently, an increase in property value correlates with a greater probability of accessing formal credit and obtaining larger loans.
The education level of a household head (HHEDU) positively influences both the likelihood of borrowing and the size of loans obtained Regression analysis reveals that a higher education level equips householders with the necessary skills to navigate complex banking procedures and effectively manage profits from their investments, thereby increasing their chances of securing larger loans.
The HHSIZE variable positively influences both models, indicating that larger households have increased opportunities to borrow and secure larger loans This is attributed to a higher number of male members, leading to greater consumption and, consequently, a higher demand for loans Households with more members are more inclined to apply for formal credit, enhancing their chances of accessing larger loan amounts Additionally, larger households, particularly those with working members aged 15 to 60, tend to generate income, which positively impacts their creditworthiness in the eyes of lenders.
The positive relationship between the age of household heads and access to formal credit is evident, particularly among the young population in MD, where the average age is 34 Young households tend to demand more credit due to two main factors: they prioritize consumption over savings and exhibit a greater willingness to take risks This dynamic nature of younger household heads increases their likelihood of applying for formal credit, thereby enhancing their chances of securing it.
The Logit model empirical results indicate a positive relationship between households engaged in agricultural activities—such as production, service planting, breeding, forestry, or aquaculture (EMPSELFNAG)—and their access to formal credit This suggests that households involved in these sectors are more likely to secure loans, as their earnings from agricultural work enhance their creditworthiness Consequently, banks are more inclined to approve loan applications, leading to improved access to formal credit and potentially larger loan amounts for these households.
The variable EMPW AGE, representing household work for wage or salary, has a dual impact on credit access While it positively influences the ability to access formal credit, it negatively affects the loan amount Households earning a wage can leverage their income as collateral, enhancing their chances of securing loans However, since this income may be insufficient to meet banks' collateral requirements, the approved loan amount often falls short of the initial request.
The percentage of interest rates negatively impacts access to formal credit and loan sizes As interest rates rise, households become hesitant to borrow due to increased costs, leading to a decrease in demand for credit Consequently, higher interest rates diminish households' ability to access credit and reduce the amounts they can borrow.
Table 4.9b: Estimating the determinants of households' access to formal credit in MD with VHLSS 2008
Names of variables Equation Yl: Probability to borrow Equation Y2: Loan amount
Coeff t-stat Coeff t-stat cons -1.692 -2.46 -0.119 -0.15 poorhousehold -0.103 -0.45 -0.145 -1.39 pcexp2rl 0.000 1.34 *0.747 7.89 or Ln(pcexp2rl) purposeofloan 0.379 1.53 *-0.469 -4.31
Houseown 0.564 1.29 *0.197 5.75 or Ln(housevalue) hhedu *0.137 4.32 *0.030 2.43 hhsize *0.212 3.57 *0.144 5.95 sex *-0.594 -2.69 0.002 0.03 age 0.010 1.46 0.002 0.72 empselfAg *0.696 3.75 0.095 1.19 percentinterestrate *-0.186 -5.36 *-0.304 -2.18 farmsize *0.000 7.01
R-squared = 0.1021 R-squared = 0.3637 Number of obs = 856 Number of obs = 856 Prob > chi2 = 0.0000 Prob > F = 0.0000
With simultaneous equation models, which are calculated from dataset of VHLSS
Chapter conclusions
This chapter explores the measurement of household access to formal credit through two key dimensions: the probability of access and the extent of that access It combines demand and supply factors to identify the determinants influencing household access to formal credit Utilizing logistic and OLS econometric methods, the analysis is based on datasets from the Vietnam Household Living Standards Survey (VHLSS) for the years 2006 and 2008 The main conclusions drawn from this study highlight the significant factors affecting access to formal credit among households.
The study examines how household characteristics, loan features, and household endowments influence access to the formal credit sector and the amounts borrowed Empirical findings indicate that the selected models are statistically significant, with a Prob>F value of 0.000, which is less than the 5% significance level.
Several independent variables, including household income, real per capita expenditure, loan purpose, home ownership, household head's education, household size, and interest rates, show statistical significance in both models Other variables, such as the age of the household head and employment in agriculture or aquaculture, are significant in only one model, indicating their influence on access to formal credit and loan amounts Additionally, some variables, despite being statistically insignificant at the 10% level, are retained for their relevance, including home ownership, interest rates, and various employment types in agriculture.
In comparison to the three approaches discussed in Chapter 2, farm size, household education, and interest rates continue to significantly influence households' access to formal credit in MD Additionally, the application of Stiglitz's asymmetric information theory plays a crucial role in developing the formal credit sector in MD.
Loan contracts between banks and customers are often incomplete due to asymmetric information, where borrowers possess more knowledge about their projects and borrowing intentions This disparity can lead to harmful behaviors for banks, notably adverse selection, which occurs before the credit contract is signed, and moral hazard, which arises afterward To mitigate these issues, banks must address the problems associated with asymmetric information by identifying suitable borrowers and implementing close monitoring practices By doing so, banks can ensure proper borrower behavior, ultimately enabling them to recover both capital and interest.
Moreover, according to Stiglitz, the banks should restrict to lend out if the loans are not good instead of increasing interest rate h
CONCLUSION AND POLICY IMPLICATION
Conclusion
Improving access to formal credit for rural households in Maryland is crucial for enhancing their investment capabilities and overall quality of life Despite high demand for loans, the supply remains insufficient, resulting in the growth of informal credit markets Numerous challenges persist in delivering formal credit to these households, who urgently need financial support to sustain their livelihoods and grow their businesses.
The formal credit sector predominantly focuses on distinguishing between poor and non-poor households Data analysis from the VHLSS 2006 and VHLSS 2008 indicates that a significant majority of non-poor households—87% and 83% respectively—have access to credit, often receiving substantial loan amounts Furthermore, households that own homes or possess larger farms tend to secure credit more readily than others.
In recent years, a significant majority of households, specifically 79% in the 2006 VHLSS and 74% in the 2008 VHLSS, have opted for loans from the formal sector due to low interest rates Notably, the average interest rate for informal loans is over five times greater than that of formal loans, making formal lending a more attractive option Additionally, households tend to secure loan amounts from the formal sector that are three times greater than those obtained from informal sources.
The formal credit sector is increasingly enabling access to credit for low-income individuals, despite a slight decline in the overall number of both poor and non-poor borrowers Additionally, the rural credit market remains highly segmented and fragmented, with the formal sector primarily focusing on lending for agricultural and business purposes, accounting for 57% of its offerings.
885 observations in VHLSSS 2006 and 48% of 856 observations in VHLSSS 2008), the informal credit sector focuses mainly on consumption purposes (12% of the observations in both VHLSSS 2006 and VHLSSS 2008) Therefore, with the new h
The formal credit sector has experienced a decline in lending for farm and business loans, primarily due to a rise in consumption loans In practice, many households utilize both formal loans for business purposes and informal loans for consumption or other needs simultaneously.
The formal credit sector imposes stringent loan conditions primarily due to insufficient information about borrowers Only households that meet collateral requirements and have appropriate loan purposes can access credit from this sector As a result, those who do not fulfill these criteria are compelled to seek financing from the informal credit sector.
Policy implication
The findings indicate that households face two primary barriers to accessing the formal credit sector: restrictions on loan usage and strict collateral requirements To enhance households' access to formal loans, it is essential to alleviate or eliminate these constraints.
Policy implication 1: formal credit sector should develop and diversify loan portfolios
The formal credit sector in Vietnam plays a crucial role in supporting the country's industrialization and modernization by addressing the growing demand for essential household needs, including consumption, housing, production, and investment To ensure that poor households have access to loans, it is imperative for the formal credit sector to diversify its loan portfolios By expanding these portfolios, more households will be able to secure the necessary funding to meet their essential needs.
Policy implication 2: formal credit sector should diversify their procedures, especially about co/laterals
Our regression analysis indicates that both house value and average farm size positively influence the likelihood of obtaining formal credit and the total loan amounts This highlights the banking system's continued reliance on land and property as collateral Consequently, banks implement intricate procedures that may hinder households with strong production capabilities from accessing credit.
, investment plans but have relatively small farm land and house value Besides those two forms of collateral, the formal credit sector should use other assets as collaterals
The formal credit sector can leverage third-party guarantees, such as those from employers, as innovative collateral to enhance lending practices This approach addresses the information asymmetry regarding borrowers by allowing lenders to utilize a portion of the borrowers' wages for loan repayments Ultimately, these transactions rely on trust, fostering a more secure lending environment.
Policy implication 3: improve the professional skills and capacity of banking staffs to speed up borrowing appraisal process
The lengthy and complicated procedures within the banking system can hinder borrowers, potentially jeopardizing their plans To enhance project feasibility assessments and streamline the loan application process, it is essential to improve the skills and capabilities of banking staff.
Policy implication 4: government should improve the process of granting LUCs more quickly and simply
Many households lack legal ownership documents, such as Land Use Certificates (LUCs), forcing them to wait months or even years to obtain these essential papers As a result, they are unable to use their properties as collateral, which limits their investment opportunities and diminishes their potential for high profits, ultimately rendering their plans ineffective.
Policy implication 5: improve education of household head
Improving the education level of household heads significantly enhances their chances of accessing formal credit Therefore, it is crucial for households to focus on both education and financial literacy, particularly in developing effective investment plans This knowledge will enable them to navigate complex banking procedures and present their proposals clearly to secure bank approvals.
To enhance access to formal credit for rural households in the MD and across Vietnam, it is essential for the banking system and government to expand loan portfolios within the formal credit sector Additionally, simplifying banking procedures and the process for granting land use rights will significantly facilitate this access.
Research limitation
This thesis utilizes a dataset from VHLSS, which limits the measurement of key determinants influencing households' access to the formal credit sector, such as the social and political participation of the household head and awareness of credit availability Consequently, the findings are primarily relevant to the MD region and cannot be generalized to the entire country To enhance accuracy and provide specific implications for rural development, further research employing diverse methodologies is necessary to explore additional determinants not covered in this study.
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' p _details= 1 - Japan helps develop agriculture in Mekong Delta 22/07/2009- 08:46:00AM h
* logit SOL2 poorhousehold purposeofloan houseown pcexp2rl hhsize sex age hhedu empwage empselfAg percentinterestrate
Iteration 0: log likelihood= -452.38886 Iteration 1: log likelihood= -350.32998 Iteration 2: log likelihood= -341.58973 Iteration 3: log likelihood= -341.30359 Iteration 4: log likelihood= -341.30291 Logit estimates Number of obs
LR chi2(11) = Prob > chi2 = Pseudo R2
SOL2 Coef Std Err z P>lzl [95% Conf Interval]
-1 - poorhousehold I -.6495144 2545006 -2.55 0.011 -1.148327 -.1507023 purposeofloan I 1.71563 2445863 7.01 0.000 1.23625 2.195011 houseown I 646125 4009613 1.61 0.107 -.1397447 1.431995 pcexp2rl I 0000957 0000406 2.35 0.019 000016 0001753 hhsize I 2450982 070333 3.48 0.000 1072481 3829483 sex 1 -.0256679 1964499 -0.13 0.896 -.4107026 3593669 age I 0128034 0052029 2.46 0.014 002606 0230008 hhedu I 0828837 0322197 2.57 0.010 0197341 1460332 empwage I 0472659 2173519 0.22 0.828 -.3787361 4732679 empselfAg I 0893563 2075918 0.43 0.667 -.3175161 4962287 percentinterest I -.4040914 0634552 -6.37 0.000 -.5284613 -.2797216 cons 1 -1.537471 6361946 -2.42 0.016 2.78439 -.2905527
* reg lnloanamount poorhousehold purposeofloan lnpcexp2rl hhsize sex age hhedu empwage empselfAg percentinterestrate lnhousevalue farmsize, robust
Regression with robust standard errors
Number of obs = 885 F( 12, 650) = 19.19 Prob > F = 0.0000 R-squared = 0.2892 Root MSE = 93604
I Robust lnloanamount I Coef Std Err t P>ltl [95% Conf Interval]
-1 - Poorhousehold I -.2412477 1140238 -2.12 0.035 -.4651471 Purposeofloan I 270578 0795021 3.40 0.001 1144661 lnpcexp2rl I 526307 1 064618 4.94 0.000 3172565 hhsize 1 1255259 0270785 4.64 0.000 072354 sex I -.0007295 0741981 -0.01 0.992 -.1464263 age 1 -.0016686 0019658 -0.85 0.396 -.0055287 hhedu I 0314932 0120363 2.62 0.009 0078585 empwage 1 -.2190595 081694 -2.68 0.008 -.3794754