Premium
Informal Credit, Usury, or Support? A Case Study for V ietnam
Author(s) -
Viet Nguyen Cuong,
Berg Marrit
Publication year - 2014
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/deve.12042
Subject(s) - poverty , economics , per capita , index (typography) , government expenditure , usury , government (linguistics) , inequality , per capita income , demographic economics , monetary economics , public finance , economic growth , population , macroeconomics , islam , demography , mathematical analysis , philosophy , linguistics , mathematics , sociology , world wide web , computer science , theology
The informal credit market remains an important source of finance for the poor in V ietnam. Yet, little if anything is known about the impact of informal loans on poverty and inequality, and the V ietnamese 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.