Financial liberalization in Vietnam: Impact on loans from informal, formal, and semi-formal providers

Since 1986, Vietnam has gone through a process of economic reforms - a so-called 'doimoi', which included the liberalization of the financial sector. The most profound financial sector reform came in 1995, when commercial banks were allowed to freely set deposit rates to enhance competition in raising funds. This paper commences with an overview of the Vietnamese financial sector and a survey of the main reforms to this sector implemented since the late 1980s. A descriptive analysis is then provided, which compares some key characteristics of pre- and post-financial reform borrowing and savings activities using the Vietnam Living Standard Surveys of 1992/93 and 1997/98. The paper then provides an econometric analysis of the determinants of loans from different types of lenders, examining the extent to which this was affected by the financial reforms.