Determinants of Farming Households’ Credit Accessibility in Rural Areas of Vietnam: A Case Study in Haiphong City, Vietnam

Ta Linh,Nguyen Viet Cuong,Phan Thu Trang,Do Quynh Anh,Hoang Trung Lai,Dang Anh Tuan,Philippe Lebailly

doi:10.3390/su12114357

Abstract

The role of agricultural sectors in the economic development of a country is undeniable, especially in developing and least-developed ones, ensuring food supply, increasing national income, export earnings and poverty reduction. Vietnam is known as an emerging market, depending directly on agriculture-related activities for their livelihood, in which the issue of rural credit access still remains a confounding problem. The paper focuses on identifying the determinants of credit access in rural areas of Vietnam using Haiphong city as a case study, including formal and informal credit. The paper uses data collected from a survey of 180 rural households in a district of Haiphong city. The probit and linear regression models are applied to investigate the factors that determine household credit accessibility, i.e., the household’s decision to borrow and borrowing amounts. Results of this analysis reveal the different significant determinants of formal and informal credit market access. Group membership and connection are found to have significantly strong impacts on formal credit accessibility while informal credit access is strongly influenced by agriculture income and dependency ratio. The implications of these findings for enhancing formal credit accessibility and decreasing the dependence on informal markets are discussed.

Highlights

Agriculture is known as the root of rural development as well as one of the key sectors of all economies
The agriculture sector especially plays an important role in developing countries with a large number of people living in rural areas
Based on the consideration above, the aim of this study is to find out the determinants of farming household credit accessibility in both formal and informal credit markets in rural areas of Vietnam with the case in Haiphong city

Summary

Introduction

Agriculture is known as the root of rural development as well as one of the key sectors of all economies. The agriculture sector especially plays an important role in developing countries with a large number of people living in rural areas. Vietnam has been known as a developing country with more than 70% of their population living in rural zones with their main source of income from agriculture. Rural credit access in developing countries, such as Vietnam, still remains a confounding problem. This credit restriction is likely due to the nature of the rural credit markets as well as the lending procedures. Informal credit sources seemingly tend to be dominant in rural areas because of the limitation of the formal markets

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