Land-use Rights and Credit Access in Vietnam: The Role of Formal and Informal Lending in Financial Inclusion

Abstract

This paper examines how land-use rights affect household access to both formal and informal credit and how different credit sources relate to household income, using the 2020 Vietnam Household Living Standards Survey (VHLSS). We estimate probit models for borrowing choice across five lender types, Tobit models for loan amounts, and ordinary least squares (OLS) models for income effects, incorporating interaction terms to capture whether owned land is used as collateral. Results indicate that when land is pledged as collateral, loan amounts rise in both markets; for interest rates, formal pricing is largely policy invariant, while in informal markets collateral primarily sharpens the negative rate–scale slopes rather than uniformly lowering levels. We discuss mechanisms explaining why informal credit can have positive income effects (speed, contractual flexibility and embedded information) and highlight the policy implications of issuing land-use rights certificates and improving lending transparency.