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Multi-market credit rationing: The determinants of and impacts on farm performance in Vietnam

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  • Anh, Nguyen Tuan
  • Gan, Christopher
  • Anh, Dao Le Trang

Abstract

Vietnamese farm households have been suffering to a large extent from credit rationing that potentially impairs agricultural performance. Using primary data from a farm household survey in the Red River Delta region, we investigate the factors affecting agricultural credit rationing in Vietnam’s formal, semi-formal, and informal credit markets and how severely credit rationing in each market affects agricultural performance. The trivariate probit model’s results reveal that human, social, and physical capital factors help farm households ease credit rationing. A bad credit history and time to travel to credit sources increase farm households’ likelihood of being credit rationed. Credit rationing determinants vary among different credit markets implying segmentation of credit markets for agriculture. We adopt a multinomial endogenous treatment effects model to evaluate credit rationing’s impact on farm performance and find that credit rationing in any credit market has a severe, negative impact on agricultural outcomes for farm households. The study provides practical suggestions for policymakers and farm households to reduce credit rationing and boost the agricultural performance in Vietnam.

Suggested Citation

  • Anh, Nguyen Tuan & Gan, Christopher & Anh, Dao Le Trang, 2022. "Multi-market credit rationing: The determinants of and impacts on farm performance in Vietnam," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 159-173.
    • Handle: RePEc:eee:ecanpo:v:75:y:2022:i:c:p:159-173
    DOI: 10.1016/j.eap.2022.05.008
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    More about this item

    Keywords

    Farm performance; Credit rationing; Trivariate probit model; Multinomial endogenous treatment effects; Vietnam;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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