Munich Personal RePEc Archive

The impact of Micro-credit and Informal Credit on Poverty and Inequality in Vietnam

Nguyen, Cuong and Van den Berg, Marrit (2008): The impact of Micro-credit and Informal Credit on Poverty and Inequality in Vietnam.

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Abstract

This study finds a very small effect of micro-credit on income and consumption of the borrowers in the short-term. Although the effect estimates on poverty and inequality are negative, they are very small and not statistically significant. This might be because both income and credit in these survey are defined for the past 12 months. Micro-credit tends to be used in production and investment, which often require long period to be effective in increasing income and expenditure. Meanwhile, although informal credit has negative and not statistically significant impact on per capita income, it has positive and statistically significant impact on per capita expenditure. As a result, informal credit helps borrowers reduce expenditure poverty. Due the informal credit, the poverty incidence of the borrowers was reduced by around 1.6 and 1.4 percentage points in 2004 and 2006, respectively.

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