The Roles of Microfinance and Geography on Entrepreneurship and Poverty Reduction: Evidence from Female Farmers in northern Vietnam
Over the past four decades, the relationship between entrepreneurship and regional economic development is fairly well-established. Much of this work has been conducted to examine this relationship in manufacturing and service industries in advanced countries. These studies suggest that entrepreneurship is an important source of economic growth and job creation, thereby contributing to regional economic development. In its 2009 publication, World Development Report: Reshaping Economic Geography 2009, the World Bank and mainstream economists claim that underdevelopment in lagging regions is due to an insufficient supply of entrepreneurs, a lack of human capital, and limited market opportunities and access. Disagreeing with the World Banks' conclusion, recent literature points to the fact that developing countries are still economically lagging behind despite their numerous entrepreneurial activities. It suggests that the contribution of entrepreneurs to economic development in developing countries is likely to differ to that of developed countries.
Given this context, this research attempts to examine the aforementioned relationship in a developing country, namely Vietnam, and in the agricultural sector. Specifically, dissertation seeks to examine (i) the factors that influence female entrepreneurship (in the form of self-employment) among microfinance borrowers and (ii) the contribution of entrepreneurship to poverty reduction through microfinance programs in two lagging areas in northern Vietnam.
Based on a survey of 155 female farmers and producers in the districts of Soc Son and Vinh Loc, the possibility of women being self-employed and its effect on poverty reduction are explained by socio-economic factors, geography, social networks, and microfinance. The results suggest that while microfinance influences entrepreneurship among the poor, problems of geographical disadvantage and market factors should not be ignored. Further, the lack of access to microfinance can be mitigated by access to other informal forms of capital in the more urban area of Soc Son. Social network plays an important role for female farmers to engage in self-employment. However, bridging linkages between different organizations are needed to enhance information quality for its member. In regard to poverty reduction, the results indicate that self-employment reduces poverty and its relationship with poverty reduction level strengthens with better access to the public market and when participants are able to access to a considerable micro-credit loan size. The impact of self-employment on poverty through improvement in nutrition becomes more favorable at higher income levels, especially in the rural areas. Here, geographical disadvantage and poor market factors are also major problems for poverty reduction and nutrition improvement, although its negative effects are somewhat dampened by the presence of local wholesale traders, whose role is as market intermediaries.
South Asian Studies
0638: South Asian Studies