This paper assesses the determinants of rural household credit activity using data from Vietnam. We pay particular attention to identifying the separate channels of credit demand and credit supply on the amount of credit obtained by households. Credit amount per capita in the commune that the household resides in and the distance from that commune to the nearest bank branch provide the identifying variation for credit supply. The health condition of household head helps to identify credit demand. To Önd the impacts of household characteristics on credit demand and supply, we estimate a bivariate probit with partial observability and a Heckman selection model. We Önd that there is uniform access to formal credit aross rural communes
in Vietnam, although quantitative rationing does exist. The education level of household head seems to have inverse u-shape a§ects on formal credit participation: the least and the most educated households borrow least. The problem of limited screening power and asymmetric information is revealed in the result that the further the distance from a commune to a bank branch, the less likely a formal bank will lend to residents of that commune. Predictionof formal credit demand is estimated reducing over the years suggesting lack of investment opportunity for rural households. With respect to policy implications, we suggest that the government could expand other programmes like
job creation or vocational training, and could introduce a policy calling for more investment in far and distant rural areas.