5 Rural Credit Policy in the Mountains of Northern Vietnam: Sustainability, Outreach and Impact

Abstract

This paper examines the efficiency and equity outcome of Vietnam’s rural credit policy in a mountainous district. Using a rich dataset on credit transactions and access from farmers in northern Vietnam, we analyze the credit market, the role played by the two state-owned lenders, and the interaction between the formal and informal sectors. We then assess the impact of the subsidized microcredit program on the welfare of its participants using a propensity score matching approach. Our results reveal a number of inefficiencies that need to be addressed in order to further reduce poverty and support agricultural growth.