ACCESS TO RURAL CREDIT AND ITS EFFECTS ON INCOME INEQUALITY: Study about rural households in Vietnam.

Abstract: This thesis uses Vietnamese household’s surveys from 2006 and 2008 to assess income inequality in Vietnam and households access to credit in order to boost their income. Three econometric models are introduced to explain which factors affect income, household’s value and loan value, all important factors in order to obtain loans in theory. The Vietnamese financial market is still underdeveloped where households can obtain loans through three different channels, formal market, informal market and micro credit programs. The Vietnamese government has been working to make credit more accessible to poor rural areas in order to encourage investment and move them out of poverty. The results show that poor households are receiving high loan amounts in 2006 resulting in a slight decrease in income inequality between the selected years. There is however no consistency between the years, along with that we see that there are many different obligations that households need to fulfill in order to be applicable for loans (both in the formal market and micro credit programs) indicating that there is not equal access to credit for households.