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Informal Credit, Usury, or Support? A Case Study for Vietnam

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  • Cuong Viet Nguyen
  • Marrit Berg

Abstract

type="main"> The informal credit market remains an important source of finance for the poor in Vietnam. Yet, little if anything is known about the impact of informal loans on poverty and inequality, and the Vietnamese government has no policies towards the informal credit market. In the present study paper, we found that the effect of credit from friends and relatives on per capita expenditure is positive but not statistically significant. Meanwhile, the effect of credit from private moneylenders on per capita expenditure is positive and statistically significant. Borrowing from private moneylenders increases per capita expenditure of households by around 15%. Further, it reduced the poverty incidence of borrowers by around 8.5 percentage points in 2006 and significantly decreases the poverty gap index and the poverty-severity index. Borrowing from private moneylenders also reduces expenditure inequality, albeit at a very small magnitude.

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  • Cuong Viet Nguyen & Marrit Berg, 2014. "Informal Credit, Usury, or Support? A Case Study for Vietnam," The Developing Economies, Institute of Developing Economies, vol. 52(2), pages 154-178, June.
    • Handle: RePEc:bla:deveco:v:52:y:2014:i:2:p:154-178
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    8. Helle Buchhave & Viet Cuong Nguyen & Tam Giang Nguyen & Thi Mong Hoa Pham, 2020. "Benefits of Joint Land Titling in Vietnam," World Bank Publications - Reports 33546, The World Bank Group.
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