Determinants Repayment Performance of Borrowers in Rural Mekong Delta of Vietnam

Abstract

This paper compares the repayment performance of farmers and non-farmers who borrow credit in individual and group-based schemes from formal banks in the Mekong Delta (MD) in Vietnam. The data used in this paper were collected from three provinces of the MD, and a double hurdle approach and an instrumental variable probit model were applied to analyse the determinants of repayment performance of borrowers. Scheduled repayment was analysed with loan size instrumented by a tobit model. Results show that, among the borrowers, farmers have a statistically significant higher repayment performance than non-farmers. Repayment in group schemes seems to be positively affected by educational level and by loans to farmers, and negatively by the loan amount, while repayment by independent borrowers is positively affected by the loan amount, farmers as borrowers, and the gender of borrowers.