Introduction
From the results of research findings from previous chapters, Chapter 5 will present the conclusions of the need of the poor household capital towards their jobs.
Then take out some of recommendations regard to People Credit Funds, an owned- state bank of Viet Nam and Government. Finally, some of the limitations of this thesis and the development of research in the future
Results and Summary of findings
Although in many developing economic there have been great progresses in economic development over the last 20 years, millions of the poor people and low- income households, who are just around the poverty line, rely heavily upon micro- credit, especially informal credit, as primary sources of credit to meet their demand for credit. The existence of an informal credit sector in almost all of the economies around the world especially in developing countries is the reality and reflects the failure of formal financial markets to meet poor clients‟ financial needs.
Understanding the determinants of access to informal credit and its impacts compared with the impacts of formal credit is thus an important topic, which is the rest of this thesis addresses.
Examining factors affecting credit participation and credit constraints in peri- urban and urban areas in HCM city reveals: First, the presence of many commercial banks do not help the poor people to access to formal credit, and thus the poor people in the peri-urban and urban areas rely heavily on informal credit. Furthermore, unlike the usage loans in the peri-urban and urban areas are mainly used for consumption.
Second, the poor households in peri-urban wards have a higher probability of borrowing than their counterparts in the urban wards because of better social
relationships in peri-urban areas. Moreover, competition from borrowing neighbors adversely affect the propensity of borrowing only in urban wards where the poor people depend more on government subsidized credit funds, which are limited. Next, a closer look at specified micro-credit sources reveals that the roles of marital status, communication facilities, dwelling places, and competition from neighbors vary across different credit market segments. Accordingly, married-head households tend to avoid informal credit, whereas the better-communicating households borrow more from formal credit lenders. Households far away from banks were unable to borrow
from the formal credit resources; however, these poor households in peri-urban areas were more likely to borrow from informal credit lenders. Moreover, the competition among the poor households exists only in formal credit markets which provide mostly subsidized credit loans. Overall, pooling formal and informal credit market segments would blur the picture of determining factors of credit participation. Furthermore, wealthier households in terms of asset holdings and phone ownership among the poor group appear less credit-constrained. The likelihood of both credit participation and credit constraints increases with distance to the nearest banks, which implies that households living far away were able to borrow but their credit amounts were less that their optional amounts since they mainly borrowed from informal (and also small) credit. This suggests that supply-side intervention could help in overcoming credit constraints. Overall, the poor in urban wards are slightly more credit-constrained due to exclusion by commercial banks, and by informal credit presumably due to weak community relationships and interpersonal trust.
There remain some caveats in this study; the determinants of credit
participation and constraints would come from the unobservable attributes such as household entrepreneurial ability, attitude to risks, and access to social networks, which are assumed to be associated with pre-survey incomes and assets in this study.
Further advances on the current research should control for these attributes by employing fixed effects methods on survey data to confirm the finding.
The estimates by RPES and VHLLS uncover that household credit impacts negatively and significantly on the budget share of food, whereas it affects positively on non-necessity goods, especially on education and healthcare expenditure groups.
Contrary to a common belief that the poor often think of eating and other daily spending on necessity goods when they have money on hand, especially a marginal
dollar, this study shows that the poor obviously give more priority to human capital spending than current eating, especially households whose budget shares for
education and healthcare are relatively low prior to credit participation. Education and healthcare budget shares increased when the poor borrowed. Therefore, easing access to credit sources is likely to help steadily alleviate poverty in future due to the poor improved human capital. Treatment effects can vary widely, not only across sub- groups but also along the distribution of outcomes. This chapter provides evidence where my sample design is all under the poverty line of about 20.000VNĐ (US$1) per day and would typically be considered one identifiable sub-group, for whom an average treatment effect would be estimated. Yet I find some heterogeneity in treatment effects within this seemingly homogenous sample, which would be hidden if only an average treatment effect is reported. Specifically, the RPES estimator provides clearer evidence of the effects than the VHLLS counterparts for the healthcare budget share. From a policy point of view, this suggests that facilitating access to credit sources could be a significant factor in improving the health of the urban and peri-urban poor. This study also evaluates the impact of household credit on education of the poor households in the peri-urban and urban areas in Ho Chi Minh City.
Limitations of the study
Research on the impact of household credit on the living condition, the income and education of the poor households in the peri-urban and urban areas in Ho Chi Minh City, one of the poverty reduced targeted of Ho Chi Minh, the City is the largest economic center in Viet Nam. Comparison of the proportion of the population, my number of designing samples is relatively small, 300 households. However due to the limitations of human and financial resources and then this study can only collect the
number of such samples. Thus there is also a need to have the study with a larger designing sample for this thesis because the greater sampling size is the higher precision of this study. In addition, this thesis research can exactly reflect more exactly in reality and then the selection of template may focus on the major city, crowed population households. At the same time, the expansion of the geographical scope is not only limited in Ho Chi Minh city but also whole Vietnam is also needed, in which the members of the poor households in other big cities such as Binh Duong, Hanoi, Hai Phong, Da Nang, can tho…should also be included in this survey.
Results of factor analysis and expenditure test of RPES and VHSSL showed that factors effect on living conditions, income and education really affect the need of the poor household capital credit.
This study is limited by the objects of research are the capital credit for the poor households and the scope of study is Ho Chi Minh City but we also can use the results of this study to make the material for the research of analyzing the credit capital for the poor households in Ha Noi, Hai Phong or other cities.
As mentioned in the questions of this study, the ultimate aim of the poor household is how to access the credit capital for the poor people in Ho Chi Minh City and it is reality to meet them needs. There needs to be more research on factors that influence the workplace of the poor household members as well as the factors that influence the intended to leave, or change workplace into other places are much better.
Recommendations for future study
The need for further study in this field and the recommendations for such by the researcher is based upon the review of the literature and the findings from this study. The emergent topics from the research point how to the poor people in Ho Chi
Minh City to access the credit capital of credit Funds or the commercial banks
contribute to the success of a transition, but how they also affect the educational level, working condition, living condition. Given this observation, additional research is recommended on how professional level the impact of the need of the capital credit for the poor during transitions.
Future research should take into account some of the limitations in this thesis as following below:
First, one may think about possible endogenously of education due to unobservable individual ability and the methods which fail to control for schooling quality that could lead to bias in the estimated returns to education and living condition. Another approach, though it may be harder to find data for, is to use
parents‟ education to predict wage-earner”; this approach could be applied to younger groups of the sample, but for the older groups, their parents‟ education data” would be unavailable in Ho Chi Minh City.
Second, credit participations and constraints can also be determined by unobservable attributes such as households‟ entrepreneurial ability, attitude to risks and access to social networks. In the current questionnaire used for collecting data for this thesis, I designed some questions (in the survey) to capture the access to social networks, but the “yes/no” some questions did not reflect fully the access to social networks. Future studies should design questions to represent levels of households‟
actual contribution or involvement in the social networks, and to measure
entrepreneurial ability and attitude to risk, which will enable researchers to control for influences by these variables and confirm the current thesis findings.
Future research may also use the instrumental variable method to overcome
variables in the literature, but it does not work in peri-urban and urban areas because distance affects both credit participation and the results (since banks and services are clustered together). Therefore, future research should look for appropriate
instrumental variables for peri-urban areas, for example, access to credit information could be a better instrumental variable than the distance to the nearest bank.
Third, future studies also need to investigate impacts on child academic performance, higher education and other health indicators such as height for ages, malnutrition rate, etc. to confirm the effect findings.
Finally, the designing sample used in this thesis is likely to be representative of the poor group whose initial income per capita is below the poverty line at the survey time in this particular district but not necessarily for Ho Chi Minh City or for Vietnam. In the future if
resource suffice and then one should enlarge the sample size and cover of survey areas to some other peri-urban districts of HCMC, then the result will be representative of both the poor people in HCMC and Vietnam as a whole because HCMC is the fastest urbanizing and biggest city in Vietnam.
Conclusions
This thesis has examined how the poor people in peri-urban and urban areas of Ho Chi Minh City access credit and the impacts of that credit on living condition, education, healthcare spending, age and income. It delivers the following conclusions:
First, the small sized and short-term loans fail to help improve the poor education.
Second, the effect of household credit varies across the gender. Women are more likely to receive more education investment and do more extra job at work. The finding contrasts with the existing literature on the differences in man-woman
education impacts in Ho Chi Minh City, which indicates that micro-credit benefits boys more than girls or affects girls more adversely than boys. Furthermore, evidence of the traditional view of „boys over girls‟, even though it is common in other similar developing countries, was not observed in this peri-urban and urban area of HCMC.
Third, a closer look at impacts of each credit source reveals that formal credit has brought beneficial effects to education, healthcare, income, expenditure, while informal credit has failed to do so. Consequently, to improve education and living condition in the long term needs to ease access to formal credit for the poor people.
Otherwise, the poor people will continue to rely on informal credit and will end up in debt. Therefore, informal credit may exacerbate poverty in the long term rather than help the poor people out of the poverty. The poor people are both income and credit constrained, so government interventions such as facilitating formal credit access are needed ( Caucutt & Lochner, 2005).The poor people need a “big push” to break down the vicious circle of poverty. Providing subsidies or tuition exemption to all school is an impossible solution in poor countries like Ho Chi Minh City, Vietnam since it may pose a burden on the government budget.
An alternative is to target subsidies to low-income household education. In fact, the current tuition exemption policy in Ho Chi Minh city is ineffective to help the poor people because the tuition accounts for just less than one third of total education costs and the poor household income levels.
In Ho Chi Minh, the greater education expenditure, which is influenced by the poor household budget constraints, may relate to obtaining higher quality education and better academic performance from participating in extra classes (Dang, 2007).
Therefore, credit still has an important role in education investment. However,
regulated tuition levels by the government could partly undermine the effects of credit
on education. Such examination is needed because as shown in the thesis, the role of education in earnings has become much more important during the transition to a market economy in Ho Chi Minh City. The rate of return to schooling in Ho Chi Minh City has increased quickly. The increase in the rate of return to schooling and the demand for skilled workers provides an exit from poverty for the poor in urban and peri-urban areas who rely heavily on labor income .But to use this exit they need to invest more in human capital, such as healthcare and education. One way for the poor people to increase their investment in human capital is through micro-credit, but the poor in peri-urban areas are highly credit-constrained and rely heavily on informal credit. There is distinction in borrowing behaviors between the poor households in peri-urban and urban wards in the areas of Ho Chi Minh City. In urban wards, the poor people depend more on limited and subsidized funds from the government and are less likely to borrow from informal credit which provides loans based mainly on interpersonal trust rather than collateral. The poor households in peri-urban areas who live further away from banks find it easier to borrow, while the poor households in urban areas living near banks have a lower probability of borrowing and are more credit-constrained. There are two main possible reasons: the first is mutual help among people in peri-urban areas where they have better interpersonal trust, while this trust is weak in urban areas; the second is complicated procedures such as lending procedures and property ownership certification blocking the poor people from credit resources. Apart from loans from government funds, the poor people are almost always excluded from other formal credit resources. Although the poor people are highly credit-constrained, a sizable proportion of them have obtained credit, from either government subsidized or informal credit sources. This credit participation has positive and significant effects on the poor household (Kim 2004) provides a good