What determines credit participation and credit constraints of the poor in peri-urban areas, Vietnam?
AbstractThis paper uses a novel dataset collected by the first author from peri-urban areas of Ho Chi Minh City, Vietnam in 2008 to examine how the poor use their loans, and factors affecting their credit participation and credit constraints. The paper finds the presence of many commercial banks in the areas does not help the poor, but the poor rely heavily on informal credit. Loans in the peri-urban areas are mainly used for non-productive purposes, which stresses the importance of consumption smoothing motives. Further, households in more rural wards have a higher probability of borrowing than more urban households, thanks to better community relationships and higher interpersonal trust. Competition by borrowing neighbours adversely affects the opportunity for borrowing in urban wards where the poor households’ borrowings rely much more on subsidized credit funds. A closer look at specified microcredit sources reveals that household behaviours differ in each market segment. Furthermore, the poor are highly credit-constrained. Wealthier households, in terms of asset holdings and phone possession, among the poor group appear less credit-constrained. However, except in the most rural part of the study area, the likelihood of credit constraints increases with distance to the nearest banks, which suggests that supply-side intervention could help in overcoming credit constraints. Overall, the poor in urban wards are more credit-constrained because of exclusion by commercial banks and weak interpersonal trust.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27509.
Date of creation: 10 Dec 2010
Date of revision: 17 Dec 2010
Credit participation; credit constraints; the poor; peri-urban; Vietnam;
Find related papers by JEL classification:
- R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
- NEP-DEV-2011-01-03 (Development)
- NEP-MFD-2011-01-03 (Microfinance)
- NEP-TRA-2011-01-03 (Transition Economics)
- NEP-URE-2011-01-03 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jonathan Morduch, 1995.
"Income Smoothing and Consumption Smoothing,"
Journal of Economic Perspectives,
American Economic Association, vol. 9(3), pages 103-114, Summer.
- Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Harvard Institute of Economic Research Working Papers 1727, Harvard - Institute of Economic Research.
- Morduch, J., 1995. "Income Smoothing and Consumption Smoothing," Papers 512, Harvard - Institute for International Development.
- Mikkel Barslund & Finn Tarp, 2007.
"Formal and Informal Rural Credit in Four Provinces of Vietnam,"
07-07, University of Copenhagen. Department of Economics.
- Mikkel Barslund & Finn Tarp, 2008. "Formal and Informal Rural Credit in Four Provinces of Vietnam," Journal of Development Studies, Taylor & Francis Journals, vol. 44(4), pages 485-503.
- McKenzie, David J, 2004. "Aggregate Shocks and Urban Labor Market Responses: Evidence from Argentina's Financial Crisis," Economic Development and Cultural Change, University of Chicago Press, vol. 52(4), pages 719-58, July.
- Abhijit V. Banerjee & Esther Duflo, 2010.
"Giving Credit Where It Is Due,"
Journal of Economic Perspectives,
American Economic Association, vol. 24(3), pages 61-80, Summer.
- Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 3-61.
- Dean Karlan & Markus M. Möbius & Tanya S. Rosenblat & Adam Szeidl & Hunt Allcott, 2007.
"Community Size and Network Closure,"
American Economic Review,
American Economic Association, vol. 97(2), pages 80-85, May.
- Mobius, Markus & Szeidl, Adam & Karlan, Dean & Allcott, Hunt & Rosenblat, Tanya, 2007. "Community Size and Network Closure," Scholarly Articles 2962638, Harvard University Department of Economics.
- Allcott, Hunt & Karlan, Dean & Mobius, Markus & Rosenblat, Tanya & Szeidl, Adam, 2010. "Community Size and Network Closure," Staff General Research Papers 32110, Iowa State University, Department of Economics.
- Ke Chen Chen & Mali Chivakul, 2008. "What Drives Household Borrowing and Credit Constraints? Evidence from Bosnia & Herzegovina," IMF Working Papers 08/202, International Monetary Fund.
- Townsend, Robert M, 1994.
"Risk and Insurance in Village India,"
Econometric Society, vol. 62(3), pages 539-91, May.
- Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
- Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
- Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February.
- Silvia Magri, 2002. "Italian households' debt: determinants of demand and supply," Temi di discussione (Economic working papers) 454, Bank of Italy, Economic Research and International Relations Area.
- Abhijit V. Banerjee & Esther Duflo, 2007.
"The Economic Lives of the Poor,"
Journal of Economic Perspectives,
American Economic Association, vol. 21(1), pages 141-168, Winter.
- Takashi Kurosaki, 2006. "Consumption vulnerability to risk in rural Pakistan," Journal of Development Studies, Taylor & Francis Journals, vol. 42(1), pages 70-89.
- Cuong H. Nguyen, 2007. "Determinants of Credit Participation and Its Impact on Household Consumption: Evidence From Rural Vietnam," CERT Discussion Papers 0703, Centre for Economic Reform and Transformation, Heriot Watt University.
- Bao Duong, Pham & Izumida, Yoichi, 2002. "Rural Development Finance in Vietnam: A Microeconometric Analysis of Household Surveys," World Development, Elsevier, vol. 30(2), pages 319-335, February.
- Jonathan Conning & Christopher Udry, 2005.
"Rural Financial Markets in Developing Countries,"
914, Economic Growth Center, Yale University.
- Skoufias, Emmanuel, 2003. "Economic Crises and Natural Disasters: Coping Strategies and Policy Implications," World Development, Elsevier, vol. 31(7), pages 1087-1102, July.
- Ranjula Bali Swain, 2007. "The demand and supply of credit for households," Applied Economics, Taylor & Francis Journals, vol. 39(21), pages 2681-2692.
- János István Tóth & Zsófia Árvai, 2001. "Liquidity Constraints and Consumer Impatience," MNB Working Papers 2001/2, Magyar Nemzeti Bank (the central bank of Hungary).
- Diagne, Aliou, 1999. "Determinants of household access to and participation in formal and informal credit markets in Malawi," FCND discussion papers 67, International Food Policy Research Institute (IFPRI).
- Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
- Kangogo, Daniel & Lagat, Job & Ithinji, Gicuru, 2013. "The Influence of Social Capital Dimensions on Household Participation in Micro-Credit Groups and Loan Repayment Performance in Uasin Gishu County, Kenya," MPRA Paper 48624, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.