The impact of microcredit on rural households in the Mekong River Delta of Vietnam

Abstract

This paper evaluates how microcredit affects rural households in the Mekong River Delta of Vietnam using the propensity score matching methods. The results show that the Vietnam Bank for Social Policies (VBSP) microcredit program has a significant positive impact on household consumption but no significant impact on household income. In addition, the findings show greater consumption and income impact for the ‘true poor’ when only the poor group is included in the analysis. This implies that this group benefits more from participating in the microcredit program than low-income households.

Keywords:

• microcredit
• rural households
• Mekong River Delta
• Vietnam

JEL Classifications:

• G21
• O17
• Q14

Notes

1. In 2006, the national poverty line was set at VND 260,000 (US$16) per month per person in urban areas and VND 200,000 (US$12) per month per person in rural areas.

2. GSO-WB approach follows the international poverty line which set a minimum income US$ 1.25 a day per person.

3. The definition of a certified poor household in Vietnam is more stringent than the definition of the poor by income bracket. The procedure of defining a poor household is demanding. First, a poor household has to be a permanent resident in the commune in order to apply for a poor certificate, and the household has to be recommended by his or her neighbours in the community. Then, a review based on criteria such as main source and amount of total income, house condition, assets, etc., will be done yearly. If all criteria are met, a poor certificate is issued to the household.

Additional information

Notes on contributors

Dinh Khoi Phan

Christopher Gan is professor in accounting and finance at Lincoln University, New Zealand. His research interests are microfinance, banking, Asian Economics and the stock markets. He is the director of Lincoln University Center for International Development. His recent publications are in the Journal of Asian Economics, Accounting and Finance and International Review of Economics and Finance.

Christopher Gan

Phan Dinh Khoi is lecturer and Head of Department of Finance and Banking, Can Tho University, Viet Nam. His research interests are rural finance, development economics, financial markets, behavioral finance, risks and insurance.

Gilbert V. Nartea

Gilbert V. Nartea is senior lecturer in finance at Lincoln University, New Zealand. He received his PhD degree from the University of Illinois at Urbana-Champaign. His areas of research interest include microfinance, asset pricing, decision analysis, and risk management. He has recent publications in the Journal of Asian Economics, International Review of Economics and Finance, and Pacific-Basin Finance Journal.

David A. Cohen

David A. Cohen is associate professor of marketing at Lincoln University, New Zealand. His research interests include marketing and management theory, rural finance, and the effects of advertising and promotion on consumers' health behaviors. His recent publications are in the Journal of Management and Organisation, Journal of Asia Business Studies, Asia Pacific Journal of Marketing and Logistics, and Asia Pacific Journal of Tourism Research.