Abstract
PurposeThe study examines the impact of the preferential credit provided by the Vietnam Bank for Social Policies on poverty reduction in Ninh Binh province, Vietnam. It also identifies and ranks the barriers of accessing the credit.Design/methodology/approachThe study applies fixed-effects method to handle the panel data to examine the impact of the credit on poverty reduction. It also uses face-to-face interviews and group discussions to identify and rank the barriers of accessing to the credit.FindingsThe results show that the credit (represented by loan volume) positively and significantly helps improve household income, but does not help to improve household consumption. The major barriers include the time spent to get to the nearest bank branch, banking support services provided to clients and the transparency of household poverty status assessment.Research limitations/implicationsData are collected in three years and the number of the observations is limited to 300 households.Practical implicationsThe VBSP preferential credit may need to be modified to significantly help reduce poverty and the VBSP and involved parties may need to eliminate the barriers so that the poor can have a better access to the credit.Social implicationsThe VBSP preferential credit is one of the reasonable sources that can help eliminate poverty though increasing household income.Originality/valueThe VBSP preferential credit can help increase household income, but does not really help improve household consumption due to the small volume of loans. In addition, banking support services and the household poverty assessment are seen as barriers to the access of the poor.
Highlights
There are multiple factors that can contribute to household welfare, to poverty
The constraint to access to credit, preferential credit is the most important reason that attributes to household welfare and poverty (Banerjee and Newman, 1993; Galor and Zeira, 1993; Hudon, 2009; Pitt and Khandker, 1998; Quach et al, 2005)
The current study examines if the preferential loans provided by the Vietnam Bank for Social Policies (VBSP) plays any roles in the achievement and identifies barriers to the access to the loans
Summary
There are multiple factors that can contribute to household welfare, to poverty. Previous studies showed inconsistent results on the contribution of preferential credit to household welfare and poverty reduction. In the international context, Pitt and Khandker (1998) showed that access to microfinance credit (a specific type of preferential credit) helped the poor in Bangladesh to improve household welfare, reduce poverty. Ninh Binh province is the ancient capital of Vietnam with many world-famous tourism spots such as the Trang An World Heritage, Cuc Phuong National Park and Con Noi World Biosphere Reserve. The current study examines if the preferential loans provided by the VBSP plays any roles in the achievement and identifies barriers to the access to the loans
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