Determinants of Financial Inclusion: A Case Study of Remittance Recipients in Vietnam

Abstract: The topic of financial inclusion has attracted attention from several researchers and policymakers in the recent years. However, there has been limited number of studies in the context of Vietnam, especially to explore the factors driving financial inclusion in the country. The thesis aims to investigate the determinants of financial inclusion in Vietnam with a focus on a special group: the remittance recipients or migrant households. This qualitative study employs a constructivist grounded theory approach in which 27 Vietnamese migrant households are the key units of analysis. A 2-week field study was conducted at 4 provinces in the Mekong Delta, Central Highlands, and North Central Coast regions of Vietnam in November 2019 to capture information about how remittances were spent, which serves as a basis to explore financial inclusion determinants among remittance recipients. All data were triangulated with observational data, field notes, verbal data collected by discussions with 6 former remitters, 10 expert interviews conducted before and during the field trip as well as speeches and discussions during the 3rd Asia Finance Forum: The Future of Inclusive Finance, organized by the Asian Development Bank prior to the field trip to ensure the credibility and reliability of the results. The findings show that remittances were primarily used for living expenses, followed by social relationship maintenance, paying debts, upgrading/building houses and forming informal financial networks. Remittance recipients in Vietnam appeared to have average financial literacy to make reasonable financial decisions for them. However, there were mismatches in the individuals’ demands and the services provided by the formal financial institutions. High costs, complex documentation requirements and inflexibility were defined as limitations from formal financial institutions as supply-side in providing suitable financial services to migrant households. Besides, from demand perspectives, insufficient income of migrant households, Vietnamese strong cash culture, in turn, kept remittance recipients from using banking services. Remitters were found to not only affect the spending patterns of their families, but also influence their households’ decisions to use services provided by formal financial institutions, hence affecting the demand-side of financial services.