Land Ownership and Informal Credit in Rural Vietnam

Access to credit and its cost is a major challenge for farmers in developing countries. Several studies show that land serves as collateral for accessing formal credit, but they often do not find any significant effect of land size on access to informal credit. I study the effects of land ownership on both the demand and the cost of informal credit in the Mekong Delta. The results show that as land ownership increases, both the demand and the cost of informal loans decrease. Design and implementation of appropriate land redistributions seems a fundamental way to fight the informal credit market.