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This thesis aims to explore the factors influencing access to credit because a sufficient access to credit can improve agricultural production condition of households in rural areas. The terms and conditions under which credit is transacted may vary substantially across different transactions, depending on the characteristics of the borrower and lender and the relationship between them. Consequently, in order to improve access to credit of rural households, factors of borrowing level of households need to be studied.

For this purpose, a fieldwork was conducted in Tan Linh commune, Ba Vi district Ha Tay province with the objectives to examine (a) the credit demand and factors of borrowing level of rural households, (b) the behaviour of a formal lender in rationing credit, (c) the influence of credit on rural household production. Data collection methods used were a household survey, group discussions, key informant interviews and data and information from business statistics as well as other secondary sources provided by the district and commune branches of banks.

The results show that there exists a large demand for credit by the local farmers, especially those portions of the amount needed but not applied for, due to risks and uncertainties particularly for fear of rejection by formal lenders. This mind set among loan and non-loan borrowers were found in all household groups but was most prevalent among poor households. Farmers were rational in deciding which sources to ask for a particular kind of loan. The amount of credit applied for by households to VBARD, dependency ratio, number of sick persons, owned farming area, the ownership of Land Use Certificates (LUCs) are factors that influence credit rationing by VBARD. Credit status influences on agricultural production, particular for livestock production.


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