Roles of Microfinance for Poverty Reduction and Development- Theoretical Debates and Practical Evidences from Vietnam

Abstract

The paper aims at synthesizing the key theoretical debates and practical experience on the role of microfinance (MF) for
poverty reduction and development. The key theories of MF
prove (i) MF has an important role for poverty reduction and economic development, but is not the only and optimal
solution; (ii) three theoretical approaches on MFprovision for poverty reduction and development: Traditional approach
with preferential interest rates; Ohio with high interest rates; New Institutional approach focused on developing the
suitable operational institutions. In Vietnam (i) MF is expected to contribute greatly to poverty reduction and economic
development campaigns; (ii) but the net impact of MF have not been specificly quantified; (iii) the access of the poor
to preferential credit in Vietnam is relatively good; and (iv) these approaches are applied by MF providers in Vietnam
at different levels. Of which, the traditional approach has been applied more in Vietnam Bank for Social Policies - the
leading MF provider in Vietnam.