Rural Credit and Household Poverty Reduction in Vietnam: Evidence Using Panel Data from Household Surveys

This paper uses panel data obtained from household surveys in Bangladesh to find out the long-term impact of credit on household welfare.

The authors use a statistical model to calculate the household borrowing and household welfare status. This model suggests that the time interval of borrowing of a particular household in a village is proportional to the:

• Household characteristics;
• Local market characteristics;
• Lender characteristics;
• Accumulated credit that the household has borrowed by that time.

The authors present empirical evidence on the impact of borrowing on the household welfare. Some of the highlights of this are:

• Reduction in borrowing when the head of household gets older;
• Increase in savings within a period leading to lower probability of borrowing in the next period;
• More education resulting in higher income and reduction in household borrowing.

The paper concludes that credit has a long-term positive and significant impact on household welfare at a 1% level of significance.