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Impact of microcredit on rural household welfare and economic growth in Vietnam

Pham Tien Thanh, Katsuhiro Saito and Pham Bao Duong

Journal of Policy Modeling, 2019, vol. 41, issue 1, 120-139

Abstract: Since its birth in 1970s, microcredit has been growing rapidly with the aim to reduce poverty and to promote economic growth. Using the large panel data of the Vietnam Access to Resources Household Surveys, the objectives are twofold: (i) to evaluate the micro-impact of microcredit on rural household economy, particularly on output value and net income of rural households, using Matched Difference-in-Difference method; and (ii) to evaluate its macro-impact on economic growth, especially the aggregate effect of production increase and income growth, using Input–Output analysis. The results at micro level find that microcredit benefits self-employment rather than other economic activities of households. The salient results from the macro-economic analysis reveal that, not as expected, the effect of microcredit on output increase is not so large. The findings suggest that microcredit is an effective development strategy at both micro and macro levels, thus the Vietnamese government should enact the relevant policies to enhance the effectiveness and outreach of microcredit.

Keywords: Microcredit; Poverty reduction; Economic growth; Input–Output analysis; Matched Difference-in-Difference (search for similar items in EconPapers)
JEL-codes: C67 C68 G21 I38 O11 O12 Q12 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jpolmod.2019.02.007

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