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Does Microcredit Improve Rural Households’ Social Network? Evidence from Vietnam

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  • Chung Thanh Phan
  • Sizhong Sun
  • Zhang-Yue Zhou
  • Rabiul Beg

Abstract

Although microcredit targets both financial and, more importantly, social returns, it is unclear in existing literature that whether participating in microcredit programs fosters social network. Filling this gap, this study aims to quantitatively test whether microcredit improves the social network of rural households in Vietnam. Specifically, with microcredit borrowing to fund its family business, a representative household is engaged in a two-stage decision problem, namely to first choose a social network and then consumption to maximise its lifetime utility. Utility maximisation yields an optimal social network as a function of microcredit borrowing, which is estimated using the VARHS dataset from 2008 to 2016 in Vietnam. We find that microcredit improves both rural household’s social network quality and size.

Suggested Citation

  • Chung Thanh Phan & Sizhong Sun & Zhang-Yue Zhou & Rabiul Beg, 2020. "Does Microcredit Improve Rural Households’ Social Network? Evidence from Vietnam," Journal of Development Studies, Taylor & Francis Journals, vol. 56(10), pages 1947-1963, October.
    • Handle: RePEc:taf:jdevst:v:56:y:2020:i:10:p:1947-1963
    DOI: 10.1080/00220388.2020.1725485
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    Cited by:

    1. Allison Benson & Jean-Paul Faguet, 2023. "Increasing Access to Formal Agricultural Credit: The Role of Rural Producer Organisations," Journal of Development Studies, Taylor & Francis Journals, vol. 59(1), pages 21-38, January.
    2. Chung Thanh Phan & Thang Tat Vo & Diem Thi Hong Vo, 2023. "Can microcredit reduce vulnerability to poverty? Evidence from rural Vietnam," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 608-629, February.
    3. Marcelo Arbex & Jéssica Faciroli & Ricardo Silva Freguglia & Marcel de Toledo Vieira, 2023. "Brazil’s Bolsa Família: Neighborhood and Racial Group Networks," Journal of Development Studies, Taylor & Francis Journals, vol. 59(4), pages 593-610, April.
    4. Phan, Chung Thanh & Sun, Sizhong & Zhou, Zhang-Yue & Beg, Rabiul & Ramsawak, Richard, 2023. "Does productive microcredit improve rural children's education? Evidence from rural Vietnam," Journal of Asian Economics, Elsevier, vol. 84(C).

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