Geographical Distance and Access to Bank Credit of Vietnamese Farmers

This paper estimates the impact of bank-borrower geographical distance on the access of farming households using a primary dataset on 1,234 rice farming households in Vietnam. Despite tremendous progress in the internet and telecommunication infrastructures for e-banking that helps relieve information asymmetry and transaction costs, the geographical distance still negatively affects the access of farming households to bank credit. Moreover, the distance from their locations to the nearest provincial roads aggravates this effect. We also find that collateral and the length of credit relationships relieve the adverse restraints on their access to bank credit, as do family members who are bank officers or rice traders or are friends of those agents. The main findings of this paper point to the importance of banks expanding their branch networks and the conversion of local roads to provincial roads by the government in terms of enhancing rice farming households’ access to bank credit.