The Journal of Asian Finance, Economics and Business (JAFEB) 제7권 제5호 (p.119-130)

Formal versus Informal Credit: Which is Better in Helping Rural Areas in Vietnam?

키워드 :
Formal Credit,Informal Credit,Semi-Formal Credit,Income,Expenditure


1. Introduction
2. Literature Review
   2.1. Rural Credit Market in Vietnam
   2.2. Previous Studies on Credit in Rural Areas in Vietnam
3. Methodology
   3.1. Datas
   3.2. Econometrics Models
4. Results and Discussion
   4.1. Access to Credit in Rural Areas versus Urban Areas
   4.2. Impacts of Types of Credit on Household Income in Rural Areas
   4.3. Impacts of Types of Credit on Household Expenditures in Rural Areas
5. Conclusions


The study seeks to evaluate the impacts of three types of credit – formal, semi-formal, and informal credits – on the well-being of households in Vietnam’s rural areas. Based on data from the Vietnam Household Living Standard Surveys in 2014 and 2016, the research uses the instrumental variable fixed-effect models to estimate the effects of three kinds of credit on household’s per capita income and expenditure. There are some significant findings. First, in rural areas, formal credit is the most popular source with stable and cheap borrowing costs. Informal credit is a complement to formal credit to meet urgent needs. Funding agriculture activities is the most commonly cited purpose of borrowing, followed by purchasing assets. The highest misuse rate belongs to the group of loans for agriculture production. Second, the results show that credit helps smoothen consumption rather than generate income for rural households. Three types of credit have insignificant or negative effects on household’s per capita income. Formal loans significantly improve total expenditure and spending on healthcare and education. Informal and semi-formal credits show a little influence on consumption. Informal loans have a significantly positive effect on healthcare expenditure. In contrast, having semi-formal loans tends to decrease spending on foods.