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Corporatism, credit and clients : a political economy analysis of government credit programs for the poor in Vietnamical economy analysis of government credit programs for the poor in Vietnam Delaney, James

Abstract

Political economic analysis of state-run rural finance programs in Asia have largely followed two schools of thought. First, rational choice economic approaches have assumed that political interests of politicians will inevitably override economic efficiency of such programs. Given the rationing of limited resources that takes place in the political arena, the more government involvement there is in credit programs, the less likely it is the poor and other vulnerable groups will access loans and development services. More recent approaches have drawn from studies of the efficacy of the many informal financial institutions (known as ROSCAs) that have existed for centuries in rural Asia. Lessons from informal practice have focused analytical attention on social capital, mutual aid and empowerment; once again diminishing the potential role of the state as a financial intermediary. Vietnam provides an interesting counterpoint to both of these schools of thought. The stunning success (as measured through outreach and market share) of government rural finance programs through state-owned development banks and mass organizations has pushed NGOs and private banks out of the rural finance picture. I argue that the critical characteristic of the Vietnamese credit model, lies in the increasing embeddedness of the Vietnamese state in rural society. Vietnamese credit programs and state banks use credit as a means both to reduce poverty by bringing the poor into the market and also to strengthen state institutions at the local level. The key logic to the expansion of the market and state is the replacing of traditional, informal credit arrangements and forms of governance with institutions of the modern market and the modern state.

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