Does Microfinance Improve Household Welfare of Ethnic Minorities? Evidence from Bac Kan Province, Vietnam

Vu Thu Ha

Goto Daisaku

IDEC DP2 Series

In Vietnam, despite the remarkable achievement in poverty alleviation, high poverty rates are still present in mountainous regions, where 75% of minority ethnic group members live. Ethnic minorities account for only 15% of the entire population, but they make up 50% of the impoverished population. Ethnic minorities have absolute disadvantages in access to fundamental economic elements: market information, productive land, mobility, educational opportunity and financial opportunity. The microcredit from the Vietnam Bank for Social Policies (VBSP) is considered as one of the key initiatives to improve the welfare of the low-income class and ethnic minority impoverished people in particular. This study examines whether the microfinance loan for the low-income class from VBSP reduces poverty in the northern mountainous area, where many ethnic minorities live. A stratified random sampling technique is applied to a sample of 289 households, including 204 loan beneficiaries and 85 control households. Among the 289 households, 263 households are inhabited by ethnic minorities. Propensity score matching (PSM) is applied to estimate the impacts (as average treatment effects on the treated) of microfinance loans on total cash income per capita, total expenditure per capita, food expenditure per capita, health expenditure per capita, and educational expenditure per student. As an alternative estimation method, regression-adjusted matching is adopted to check the robustness of estimations. The results show that the impacts of the microfinance loan on total expenditure per capita and educational expenditure per student are positive and robust, which supports the poverty alleviation effects of microfinancing in areas populated by ethnic minorities in Vietnam.

Microfinance

Ethnic minorities

Propensity score matching

Economics [ 330 ]

eng

広島大学大学院国際協力研究科