Impact Of Microcredit On Food Consumption: Situation In Vietnam

Abstract

The question of whether increased access to microcredit enhances food consumption in rural households remains a pivotal yet inconclusive subject in development literature. This paper provides a dual contribution to this discourse through both theoretical and empirical lenses. Initially, we construct a theoretical model wherein microcredit serves as a financial instrument for a representative household's family business. The household strategically maximizes its lifelong utility, resulting in a dynamic optimal consumption trajectory contingent on microcredit utilization. Subsequently, leveraging the Vietnam Access to Resources Household Survey (VARHS) dataset spanning from 2008 to 2016, we empirically assess the impact of microcredit on food consumption. Our findings reveal an initial negative effect on food consumption, which transforms into a positive impact over the long term. These insights shed light on the complex interplay between microcredit access and household food consumption dynamics.