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http://dx.doi.org/10.13106/jafeb.2021.vol8.no4.0171

Credit Rationing and Trade Credit Use by Farmers in Vietnam  

LE, Ninh Khuong (Department of Economics, College of Economics, Can Tho University)
PHAN, Tu Anh (Department of International Business, College of Economics, Can Tho University)
CAO, Hon Van (Faculty of Economics and Business Admisnistration, An Giang University, National University of Ho Chi Minh City)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.4, 2021 , pp. 171-180 More about this Journal
Abstract
The purpose of this paper is to estimate the impact of credit rationing on the amount of trade credit used by farmers in Vietnam. This study employs a survey data collected through direct interviews with heads of 1,065 rice households randomly selected out of provinces and city in the Mekong River Delta (MRD). In each province or city, the village with the largest area of land devoted to rice production from the district with the largest area of land devoted to rice production was picked up for survey. In each village, 200 rice farmers were randomly chosen for interview. Based on a probit model and a semi-parametric propensity score matching (PSM) estimator while controlling socio-demographic traits of rice farmers, the estimated results show that non-credit rationed farmers use less trade credit to finance production compared to their credit rationed counterparts. Moreover, the amount of trade credit used by farmers decreases as the degree of credit rationing drops. This paper provides evidence of the substitutive relationship between bank credit and trade credit. It also implicitly suggests that banks can drive trade creditors out of the market if they manage to solve the problem of information asymmetry and transaction cost.
Keywords
Credit Rationing; PSM; Rice Farmer; Trade Credit; Vietnam;
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