Empirical Studies on Social Capital, Land and Credit Institutions
5 Rural Credit Policy in the Mountains of Northern Vietnam: Sustainability, Outreach and Impact
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5. Rural Credit Policy in the Mountains of Northern Vietnam: Sustainability, Outreach and Impact
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.
Since the decollectivization and the vote of Doi Moi program in 1986 leading the transition of the economy from a centrally-planned to a market-oriented system, Vietnam has undertaken a series of reforms aimed at transforming the incentive structure in the rural economy and return farmers to the center of decision making. To this aim, agricultural markets were gradually liberalized, user rights were transferred to smallholder farmers for most of the agricultural land and some of the forest land. As a result, agricultural production and rural economic growth led to a large reduction in poverty throughout the country. These improvements have not been evenly dispersed throughout the country, and mountainous regions, specifically the Central Highland and the Northern Uplands, have lagged behind and experienced lower economic...
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