Information Systems in Rural Financial Intermediation in Northern Vietnam
Access to financial services can contribute to hunger eradication and poverty alleviation. Therefore, from the early 1990s onwards, the Vietnamese government has established and promoted formal financial intermediaries (FFIs) such as the Vietnam Bank for Agriculture and Rural Development (VBARD), the Vietnam Bank for the Poor (VBP) and the Peoples Credit Funds to provide the rural poor with loans.
This paper focuses on the information systems required in the credit allocation process and, in particular, attempts to:
- Identify crucial gatekeepers of important credit information;
- Describe the formalized and non-formalized information channels and to which extent they reach the target group.
Considering the importance of information availability during the allocation process of loans to empower the rural poor and subsequently raise their welfare, a careful analysis of eventual information asymmetries is essential. This paper suggests that in Northern Vietnam there are problems of resource misallocation because of the following information deficiencies:
- Heads of the communes do not always sufficiently inform all villages in their communes about credit availability;
- Village officials do not always make certain that all households in their village get the news;
- Local authorities are also responsible for the poverty assessment of households and might assess relatives', friends', or neighbors ' households as poor to give them easier access to the loans, thus impacting the target group.
Finally, in order to make the available information more transparent to potential borrowers, the authors recommend that:
- Key informants of a formal financial institutions in a certain region should not all belong to the same network;
- Non-governmental organizations or self-help groups are key informants from other networks.
