Credit is commonly considered an important instrument to relieve financial capital constraints of poor households and subsequently to improve their welfare. However, the empirical impact of credit on consumption inequality remains ambiguous. We use a 2-year panel dataset collected in Daklak, a province in the Central Highlands of Vietnam, to investigate the differences in access to credit and its impact on household consumption and consumption inequality between ethnic groups. Our results show that the differences in access to credit and in its impacts on household consumption between the ethnic majority and the migrant ethnic minority groups are insignificant. However, households from the indigenous ethnic minority group face more disadvantages in accessing formal credit and rely more on informal credit than those from the ethnic majority. They also face a higher collateral ratio and the amount of formal loans they could access is lower. The impact of formal credit on consumption of the majority is also higher than that of the indigenous minority, consequently causing a significant increase in consumption inequality between the ethnic groups. Our findings call for assistance programs to support indigenous households to improve their access to formal credit as well as to enhance the effectiveness of these loans.
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We thank the farmers of the surveyed provinces for their support and cooperation. The constructive comments from the editor and two anonymous referees are highly appreciated. We acknowledge the financial support of the German Research Foundation (DFG - FOR 756) and appreciate the efforts of our colleagues at the Leibniz University Hannover for data collection.
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Nguyen, TT., Nguyen, T.T. & Grote, U. Credit and Ethnic Consumption Inequality in the Central Highlands of Vietnam. Soc Indic Res 148, 143–172 (2020). https://doi.org/10.1007/s11205-019-02202-z
- Conditional-mixed process (CMP)
- Triple difference with fixed effects (DDD)