Self-selection out of formal credit markets: evidence from rural Vietnam

Le Khuong Ninh
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Abstract

PurposeThis paper examines why farmers self-select out of formal credit markets even though they need external funds.Design/methodology/approachWe use probit and Bayesian probit estimators to detect the determinants of self-selection behavior based on a primary dataset of 2,212 rice farmers in Vietnam. After that, we use the multinomial probit (MNP) and Bayesian MNP estimators to reveal the impact of relevant factors on the decision to self-select for farmers belonging to each self-selection category.FindingsThe probit and Bayesian probit estimators show that the decision to self-select depends on household head age, income per capita, farm size, whether or not to have relatives or friends working for banks, the number of previous borrowings, risks related to natural disasters, diseases, and rice price, and the number of banks with which the farmer has relationships. The MNP and Bayesian MNP estimators give further insights into the decision of farmers to self-select in that determinants of the self-selection behavior depend on the reasons to self-select. In concrete, farm size and the number of previous borrowings mitigate the self-selection of farmers who did not apply for loans due to having access to other preferred sources of credit. The self-selection of farmers not applying for loans because of unfavorable loan terms is conditional on household head age, farming experience, income, farm size, the number of previous borrowings, natural disaster risk, and the number of banks the farmer has relationships with. Several factors, including education, income, the distance to the nearest bank, whether or not having relatives or friends working for banks, the number of previous borrowings, risks, and the number of banks the farmer has relationships with, affect the self-selection of farmers not applying for loans because of high borrowing costs. The self-selection of farmers not applying for loans because of complex application procedures depends on income and the number of previous borrowings. Finally, the household head’s age, gender, experience, income, farm size, the amount of trade credit granted, the number of previous borrowings, natural disaster risk, and the number of banks the farmer has relationships with are the determinants of the self-selection of farmers not applying for loans because of a fear not being able to repay.Practical implicationsThis paper fills the knowledge gap by investigating why farmers self-select out of formal credit markets. It provides evidence of how the farmers’ subjective perceptions of rural credit markets contribute to their self-selection.Originality/valueThis paper shows that demand-side constraints are also vital for farmers’ access to bank credit. Improving credit access via easing supply-side constraints may not increase credit uptake without addressing demand-side factors. Given that finding, it recommends policies to improve access to bank credit for farmers regarding the demand side.
退出正规信贷市场的自我选择:来自越南农村的证据
设计/方法/方法我们使用 probit 和 Bayesian probit 估计器,根据越南 2,212 名水稻种植农户的原始数据集来检测自我选择行为的决定因素。结果probit 和 Bayesian probit 估计器显示,自我选择的决定取决于户主年龄、人均收入、农场规模、是否有亲戚或朋友在银行工作、以前的借款次数、与自然灾害、疾病和大米价格相关的风险以及与农民有关系的银行数量。MNP 和贝叶斯 MNP 估计器进一步揭示了农民自我选择的决定因素,即自我选择行为的决定因素取决于自我选择的原因。具体而言,农场规模和以前的借款次数减轻了因有其他首选信贷来源而未申请贷款的农户的自我选择。农户因贷款条件不利而不申请贷款的自我选择取决于户主年龄、务农经验、收入、农场规模、以往借款次数、自然灾害风险以及与农户有合作关系的银行数量。教育程度、收入、与最近银行的距离、是否有亲戚或朋友在银行工作、以前的借款次数、风险以及与之有关系的银行数量等因素会影响农民因借款成本高而不申请贷款的自我选择。农户因申请程序复杂而不申请贷款的自我选择取决于收入和以前的借款次数。最后,户主的年龄、性别、经验、收入、农场规模、获得的贸易信贷额度、以前的借款次数、自然灾害风险以及与农户有合作关系的银行数量是农户因担心无力偿还而不申请贷款的决定因素。本文提供了农民对农村信贷市场的主观认识如何导致其自我选择的证据。原创性/价值本文表明,需求方的制约因素对农民获得银行信贷也至关重要。如果不解决需求方的因素,通过缓解供应方的限制来改善信贷获取可能无法提高信贷吸收率。有鉴于此,本文从需求方面提出了改善农民获得银行信贷的政策建议。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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