The paper offers three groups of policies for promoting the role and improving efficiency of the formal credit programs on the household income in rural Vietnam. | 144 Dinh Phi Ho & Dong Duc / Journal of Economic Development 22 (2) 144-160 Impact of Formal Credit on Rural Household Income in Vietnam DINH PHI HO University of Economics HCMC – dinhphiho@ DONG DUC dongduc231@ ARTICLE INFO ABSTRACT Article history: Many studies have been conducted to estimate effects of rural credit programs on household income in both Vietnam and foreign coutries. Some provided positive evidence of such programs’ efficiency while others suggest that not all credit programs improved household income. Responding to the question of whether formal credit affects household income will contribute to directions determined to adjust allocation of resources for agriculture and rural development. In addition to the use of Difference-in-Differences (DD) method in connection with pooled OLS regression, this paper employs panel data from Vietnam Access to Resources Household Survey (VARHS) in the years 2006–2012, and finds that the formal credit does have effects on the rural household income. Additionally, the paper offers three groups of policies for promoting the role and improving efficiency of the formal credit programs on the household income in rural Vietnam. Received: Dec. 29 2014 Received in revised form: Jan. 30 2015 Accepted: Mar. 26 2015 Keywords: Formal credit, policy impact, household income, difference-indifferences method, panel data regression. Dinh Phi Ho & Dong Duc / Journal of Economic Development 22 (2) 144-160 145 1. Introduction Access to agricultural credit is an especially important factor in the context of rural development in Vietnam. Capital on its own cannot flow from developed sectors to agricultural regions; thus, government must ensure credit resource allocation to compensate for the lack of financial resources in rural areas as well as to overcome the market failure in its access to people with low income. The development of Vietnam credit market was acknowledged after “Doi moi” in 1986 (Phan, .
