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March 29th, 2019

Access to rural credit markets in developing countries, the case of Vietnam: A literature review

Published by Sustainability Journal,

This article (PDF) in the Sustainability Journal focuses on the characteristics of rural credit markets, the determinants of farmer access to markets, the socio-economic impacts of credit access in Vietnam and comparing those of some developing countries. The agricultural sectors play an important role in the process of economic development of a country, especially in developing ones. Vietnam is known as an emerging market, which depends directly on agriculture-related activities for their livelihood, in which the issues or rural credt access still remains a confounding problem. Rural credit markets in developing countries often include both formal and informal markets, that can complement each other. Many socio-economic factors have an impact on farmers’ credit accessibility. Social capital is also seen as the invisibile one affecting houholds’ access to credit. In the paper, an overview of Vietnam rural credit markets and its characteristics of limited market participation, government intervention, and segmentation have been clearly indicated. Although positive relationship among credit access, output production, productive efficiency, and total household income are found in most papers; credit also has positively significant impacts on only non-farm income. The poor farmers with their main income from agricultural activities are likely to be excluded from formal markets. For housholds, the main solution is to expand the lending network of financial institutions through local socio-political associations as guarantors and borrowers that gathered in groups. Financial institutions need to change their mind-set about target clients. Banks should allocate capital to agricultural sectors, enhance loan procedures and reduce lending costs. Policy makers should ensure that government interventions in rural credit markets should be determined to ensure market competitiveness. Subsidized credit is likely to be increasingly ineffective in fast-growing economies. Future research is recommended on comparative studies of the markets in other developing countries in terms of characteristics and components of the markets.

Curated from mdpi.com