The impact of microfinance on poverty reduction in Vietnam: A dynamic panel-data analysis

Abstract

The current study uses the Generalised Method of Moments to examine the dynamic relationship between access to microfinance and poverty reduction. The panel-data set is constructed from the Vietnam Household Living Standard Surveys during 2002–2008. The results show that access to microfinance in the previous period significantly improves per adult-equivalent income and consumption of the households in the current period. However, previous participation in microfinance programs is not sufficient to help households escape from poverty. In addition, both private and government bank loans significantly help improve household per adult-equivalent income, consumption, and poverty rates. The empirical results imply that a larger loan size, diversified loans for different consumption purposes, and improvement in infrastructure and facilities, especially in rural areas, are believed to help reduce poverty.